exercising an option

M

met1989

what happnes if im selling a call/put and its in the money and the buyer decides to execute the option when its IN THE MONEY what happpnes in my account i bassiclly will be long / short the underlaying?
 
No. It would be best to learn about option, how they work and feel comfortable with the process. Then develop a method to determine where you expect a stock or index will or won't trade over a time period, then look at what options are available and how they are priced, then execute a single or multiple leg option strategy that meets your expectations. Have a process to enter the trade and exit.

You never have to hold any options to expiration.
 
met1989 said:
what happnes if im selling a call/put and its in the money and the buyer decides to execute the option when its IN THE MONEY what happpnes in my account i bassiclly will be long / short the underlaying?
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Yes you could end up long or short 100 shares for each option contract. Solution:

  1. Close any ITM short options before expiry.
  2. If you do end up short or long stock just close the stock position. You might make or lose some money on the stock. No big deal.
 
met1989 said:
what happnes if im selling a call/put and its in the money and the buyer decides to execute the option when its IN THE MONEY what happpnes in my account i bassiclly will be long / short the underlaying?
More...

Yes you would be long in the underlying PROVIDED you have enough money in your account if you sold a put and short in the underlying if you have sold a call. If you had shares in the underlying that you sold the call on, those shares would be sold first and if you sold more shares in the call contracts than the shares you had in your account, you would be sold short for the additional shares.
 
met1989 said:
what happnes if im selling a call/put and its in the money and the buyer decides to execute the option when its IN THE MONEY what happpnes in my account i bassiclly will be long / short the underlaying?
More...

I fully endorse Robert Morse's advice. I think that's the best / wisest course of action.

If you have options in the money on expiration day, your broker may sell them all (usually within a couple of hours of the closing bell), unless your account balance is sufficient to cover the cost of the options exercise. The usual reason given is that ITM options not sold before close will be automatically exercised.
 
elitenapper said:
I fully endorse Robert Morse's advice. I think that's the best / wisest course of action.

If you have options in the money on expiration day, your broker may sell them all (usually within a couple of hours of the closing bell), unless your account balance is sufficient to cover the cost of the options exercise. The usual reason given is that ITM options not sold before close will be automatically exercised.
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But what if it s an American option ?
 
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