Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: Walkbarr who wrote (534)	12/21/1997 11:30:00 PM
From: Madpinto	Respond to of 2241

David, you hit the nail on the head. Most people sell instead of exercise, but exercising the call for stock is another choice. Here's a tip. If the bid in the option does not equal parity, consider shorting the stock instead of selling the call (except if the stock will pay a dividend before expiration.) You make the difference between the strike and short sale (parity). As an added bonus, you can buy the stock back if it trades under the strike price before expiration and you will still own the call. If the stock goes back over the strike again you get to sell the stock or the option. In other words, selling the stock out against your call position effectively gives you a put on the strike until you buy the stock back. Note: You do incur the additional commissions of selling the stock and having to exercise the call at expiration if the stock has remained above the strike price. Using a super discount brokerage makes this strategy more feasible.