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Strategies & Market Trends : Z Best Place to Talk Stocks

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To: aniela who wrote (47606)	4/8/2003 12:11:34 AM
From: BWAC	Read Replies (1) of 53068

<Say the stock hits the strike price plus the premium (more or less). how likely I am to be called at that point versus them letting my shares run up all the way till the expirartion date > Depends. 99 times out of 100, you won't be exercised until expiration. The amount of time premium could be a determining factor though. As long as "some" time premium exists, the option would normally just be sold by the buyer (ie not exercised against your stock). If the option buyer really wanted the stock he/she could just buy it after capturing the time premium still left in the option. A stock that has moved far away (up) from the Call strike price could actually move so far that little or no time premium exists for the Call. Even though it has months til expiration. $10 Strike Covered Call, $25 current Stock Price. A Leap $10 strike Call Option might only be valued at $15.20 This is where you will get the opiton exercised against you. The sooner the better too. Assuming you sold it at a hefty time premium. Any early exercise ACCELERATES your effective % return. Because it completes the transaction. Completes your obligation.

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