I've been tinkering with options for 20+ years and have been assigned countless times. But believe it or not, I have never exercised a position. So let's treat this like a newbie question 
I trade a variety of ratio calendars and strangles for earnings. Two weeks ago, I had a leftover position from a reverse calendar ratio straddle where the bid of the long near month call was 60 cents or so under parity. Yep, highway robbery! That 60 cts was a chunk of profit to give up.
The particulars were something like:
$37.40 - 37.45 stock
1.85 - 2.45 Mar 35 call (+4)
3.60 - 3.70 Apr 35 call (-5)
Closing the options at the respective B/A's would have been at a debit of $11.10 (+4 * 1.85 -5 * 3.70)
Am I missing something or wouldn't it have been a better idea to exercise the 4 long Mar 35 calls to obtain the stock for 35 and simultaneously shorting 400 shares at 37.40 netting 9.60 (+4 * 2.40) and covering the 5 short Apr 35 calls @ 3.70 (-18.50) thereby having a total debit of only $8.90 ? ($2.20 better)
TIA.
I trade a variety of ratio calendars and strangles for earnings. Two weeks ago, I had a leftover position from a reverse calendar ratio straddle where the bid of the long near month call was 60 cents or so under parity. Yep, highway robbery! That 60 cts was a chunk of profit to give up.
The particulars were something like:
$37.40 - 37.45 stock
1.85 - 2.45 Mar 35 call (+4)
3.60 - 3.70 Apr 35 call (-5)
Closing the options at the respective B/A's would have been at a debit of $11.10 (+4 * 1.85 -5 * 3.70)
Am I missing something or wouldn't it have been a better idea to exercise the 4 long Mar 35 calls to obtain the stock for 35 and simultaneously shorting 400 shares at 37.40 netting 9.60 (+4 * 2.40) and covering the 5 short Apr 35 calls @ 3.70 (-18.50) thereby having a total debit of only $8.90 ? ($2.20 better)
TIA.