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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: M. C. Orme who wrote (784)5/24/2001 12:57:58 PM
From: Sully-   of 5205
 
In general, the share price must be slightly above the strike price to be executed. One must factor in the cost of commissions to complete the exercise of the contracts for the options to be profitable to the holder. If they were much closer to parity, it would be less expensive to let the options contract expire & purchase the stock outright.

I believe duf's 25¢ above the strike is about what would be necessary to achieve that point...... assuming that there is more than one contract involved.

However, the option holder may, at his own discretion, exercise his options, even if the share price is below the strike (significant positive news released after the bell on the Fri of options exercise, etc.). I actually had the opposite experience once. My stock in ELON closed about a dollar above the exercise price last year, but was not exercised........ due to a less than stellar earnings announcement after the bell on options expiration. I'm sure you will find that these kinds of situations are rare though.

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