Options for Newbies -(Help Me Obi-Wan-Kenobe) Message Board

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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)

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To: jficquette who wrote (2224)	7/19/2004 5:52:52 PM
From: TimF	Read Replies (1) of 2241

Options have intrinsic value (the intrinsic value of a $30 call option is $10 is the stock is at $40), and time value (if that $30 call option expires in 2 months you can't buy it for $10, you get charged extra because of the possibility that it may appreciate over time). If you sell an itm option you get more for it then the intrinsic value. In theory you could be put the stock from your short puts right away but in practice this is unlikely. First of all few people will exercise options with time value left, they could sell it and get more, or just hang on and hope to make a bigger profit. When people do exercise some of the put options, with the same strike price and expiration that you sold, there is a random chance of being assigned. If there are 10000 outstanding contracts and you are short 10 of them and someone exercises one of the ITM puts you would have a 1 in 1000 (10 in 10000) chance of being put the stock. Tim

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