Personal Finance & Money Stack Exchange
Personal Finance & Money Stack Exchange

Questions tagged [option-exercise]

In options trading, the option holder has the right but not the obligation to buy or sell the underlying instrument at a specified price on or before a specified date in the future. Exercise means to put into effect the right specified in an option contract.

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What happens to options if a company is acquired / bought out?

I have some out of the money options with pretty far off expiry dates (Jan 2013, for example). What happens if the underlying company is acquired before then, while I'm still holding the options? Do they instantly expire worthless? What if if the…
Jer
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Why are American-style options worth more than European-style options?

Why are American-style options worth more than European-style options? I realize I can exercise American-style options anytime before the expire, but I can only exercise European-style options during their "exercise period" (usually right when…
user1731
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Confused about employee stock options: How do I afford these?

I'm confused about stock options. The numbers in the following story are fictional because I'm keeping the actual offer confidential. This is an American private company with a promising future: Current valuation estimated between 1-3…
Casey Patton
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A beginner question on call option

I made my first options transaction. I believe that a stock that is currently trading around 25, will be in the 40s, come August - based on my research (I know the stock well, and I've invested in stocks for quite some time). So: Current NYSE stock…
blispr
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Why do people exercise call options at a loss?

I sold some call options for $2.55 premium at strike price of $130. At expiration, the market price was $130.55. I thought the option was not deep in the money and at a loss of $2, hence I didn't buy to close. On Monday, I found out the option was…
fundmakesell
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Is there a reason to exercise a stock option as soon as it vests?

Background: I am currently employed by a start-up that, so far, is doing really well. As part of my contract, I have stock options that will come available on a typical vesting schedule. A quarter of my options are set to vest later this year. Also,…
Kallmanation
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What are the tax implications of exercising options early?

Say you have the following situation: You have pre-IPO stock options Half of the options have vested, the other half will vest over the next 2 years Your strike price is S The fair market value of the stock is now F, where F > S It seems likely…
Finance dunce
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Exercising an option without paying for the underlying

As a follow up to my other question, I would like to know whether the following is possible: I have $20,000 in my brokerage account The price of a call option with $300 strike price is $5.00 (1 contract = 100 shares) I buy 20 contracts of these…
Jean-Paul
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Who provides the shares for exercising a put option?

I am trying to get into investing and have some questions about options. If I buy a put option (which would be an option to sell stocks as far as I understood), who will provide the stocks to sell if I decide to exercise it? Should I have/provide…
Can't Tell
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What happens to an options contract during an all stock acquisition?

Let's say for the sake of the question you're given the following scenario: Company BIG is trading at $10/share Company SML is trading at $40/share BIG reaches an agreement with SML for an all stock acquisition/merger whereas SML shareholders will…
William LeGate
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Am I doing the math for this covered call/long put strategy correctly? What risks do I run with this strategy?

In this trade, I write an in-the-money covered call and buy an in-the-money put (as an example) on GM, expiring in September 2014. The call premium is $10.02 with a strike of $26, and the put premium is $4.17 for a strike of $37. GM's share price is…
Michael A
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Capital losses on early-purchased stock?

If I exercise an early purchase clause on employee incentive stock options to go ahead and purchase the stock and the company later goes bust, can I take capital losses against that stock?
wolak
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Any advantage to exercising ISO's in company that is not yet public?

I have ISO's in a private company and am trying to decide whether there is any advantage in exercising them. The price is low enough and my confidence in the company is high enough that I am comfortable taking a risk to exercise them. I understand…
Jim A
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Why would someone want to buy an option on the day of expiry

If I buy an Out of Money option and the option becomes In the money on the Friday of expiry, can I still expect to sell the option and close my position at a profit? Or is my only hope is to exercise the option and thereby have my profit? I want to…
Victor123
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How can I estimate the value of private stock behind employee stock options?

I'm considering an offer with generous options. I have pretty high risk tolerance, so I'm just trying to estimate the expected value of the options. To the extent possible, I want to base this on the valuations of professionals rather than my own…
user6344
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