A question about exercising

R

raf_bcn

If I decide to exercise a call, How it works? My short positions have been early assigned and I know how it works, but no if I want to exercice.
I have found this information but I don't know if is correct.

_There is no charge for exercising an option, which can be done at any
time simply by clicking on a computer screen. When the "exercise" button is clicked, IB
immediately places the stock in the investor's account and it can be sold in the market.
Within a few seconds the option holder is able to exercise his call options, and
sell the stock to lock in the current intrinsic value.

If that is correct it means IB is lending you the shares. is that possible? I doubt it.

thanks.
 
Yes @tommcginnis it is a question for the broker. But usually I get better and quicker answers here. I am pening a chat with the broker.

@beerntrading I didn't explain myself correctly. My short positions hasn't been assigned now, but in the past. I wanted to say that I know how it works when you are early assigned but
don't when I want to early exercise.
 
raf_bcn said:
@beerntrading I didn't explain myself correctly. My short positions hasn't been assigned now, but in the past. I wanted to say that I know how it works when you are early assigned but
don't when I want to early exercise.
More...
Oops, you did indeed explain that. My mind was still in the previous thread. :rolleyes:
 
What you are asking is a bit confusing.

Lending you shares occurs only when you short a stock. When you exercise a call, you are buying the stock.

If you own a call and it has time premium remaining, you are giving that extrinsic value away by exercising it.

It would make sense to exercise your call to cover a short position if the time premium lost was less than the commissions you'd be charged for selling the call and buying shares to cover.

If your call is ITM call and trading below parity (negative intrinsic value) and you can't get a closing fill near parity then it would make sense to exercise the call to acquire shares and sell them immediately in order to avoid the haircut on the STC option trade.
 
spindr0 said:
What you are asking is a bit confusing.

Lending you shares occurs only when you short a stock. When you exercise a call, you are buying the stock.

If you own a call and it has time premium remaining, you are giving that extrinsic value away by exercising it.

It would make sense to exercise your call to cover a short position if the time premium lost was less than the commissions you'd be charged for selling the call and buying shares to cover.

If your call is ITM call and trading below parity (negative intrinsic value) and you can't get a closing fill near parity then it would make sense to exercise the call to acquire shares and sell them immediately in order to avoid the haircut on the STC option trade.
More...
Yes, is an itm call.
I mean, How is it posible to get the stock immediately in my account. The other part doesn't know he has been early assigned.
This is made by the clearing house at 2.00 am east time. Or at least I thought it was that way.

But IB has told e that is posible to configure the option to get the stock immediately. Where that stock comes from? Maybe is an IB stock.
 
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