2

This is a hypothetical situation, I'm not actually in this position. I'm also an amateur with this, so correct me if I make any mistakes.

Let's say a stock is $100. You buy $4,000 worth of $0.50 call options with a strike price of $102. This is 8,000 options.

Now let's say the price of the stock goes up $5. You want to exercise your options to get a profit of $20,000. This means you have to pay $816,000 to buy your stock at the strike price. What does someone do if they don't have $816,000? It's an interesting situation because they don't have the money, but they are guaranteed to make a profit if they did.

Bob Baerker
  • 77,328
  • 15
  • 101
  • 175
dcgoss
  • 131
  • 3

1 Answers1

3

The fact that the option is deep in the money will be reflected in the market price of the option so you can just sell it at a profit. If there's a (n almost) guaranteed profit to be had, however, you can always find someone who will lend you the money to cover the exercise... they'll charge you interest, however!

MD-Tech
  • 9,156
  • 2
  • 34
  • 42