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Question
John,
My only experience to date with options is to sell covered calls and buying calls. I have never exercised my call positions but have always closed the options out before the expiration.

Could you please tell me what happens in the following scenario:
You buy a call option on stock XYZ for a strike price of $50 and on the last day of expiration the stock is trading for $60 and you want to exercise the option and buy the stock for $50.00.
If you are making your own trades on-line, Do you put in a buy order for $50 and the software recognizes your option in your account or is there another way that you initiate your trade?
If no action is taken, I'm assuming the option just expires for zero.

Thank you in advance.

Answer
Hi Joe.  If you are using an online broker like OptionsXpress or Think or Swim, there should be a drop down menu option or a button somewhere on the site to exercise the option.  This is the only way to do it.  A buy order for the stock will not recognize that you own a call option.  And yes, if you own an option and do nothing on expiration, your option will expire worthless.  Hope this helps.

Thanks,

John

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John

Expertise

I can only answer questions regarding equity options, not futures. I have a great working knowledge of both LEAPs options and standard short term options. I'm very well versed in many types of options strategies, specifically, buying straight puts and calls, writing covered calls, naked put writing, credit spreads, calendar spreads, iron condors, and butterflies. I can also help with questions regarding technical trading.

Experience

I am currently making a very nice living off of selling credit spreads and calendar spreads using weekly options on the SPY and IWM.

Education/Credentials
I have a college degree as well as ten plus years of independent study of options trading and technical analysis.

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