It wouldn't be exercised if you called your broker and told them not to. Many brokers have the automatic exercise for in the money by 25 cent options unless you specifically advise them not to. I'm sure if you also said "never automatically exercise" they'd probably agree to. If you don't like the automatic exercise rules of your broker get a new one. I think it was rather nice they called to warn/inform you/ As far as why there were no takers on that goog option, because the hassle of buying the option & exercising, then selling the stock isn't worth it when you can just put in an order for 25 cent less then current price and it will most likely be hit sooner or later.
I'm sure your broker would accept a blanket instruction not to automatically exercise, as keyser1 has suggested. Good luck.
I am new to Options maybe you can clear something up for me, say I buy 5 call contracts for XYZ for 9.00 and in a month it goes to 15, if I sell to close will i make $600. It sounds like what you do instead of excersing your right to buy the stock. Am I correct, basically I don't want to have to buy the stock so do I just want to sell to close my position. Sorry I am just staring Options and trying to get a basic understanding.
Hello again. I have been told by my broker (who I am very happy with) that they would do their very best to honor my request not to automatically exercise but they cannot fully guarantee that they won't....so since I buy and then sell to close CALLS always before expiration day (except for this one instance) I will continue doing the same and I have notified them not to automatically exercise so it is on record. Which I am glad it is now but I will mostly not be holding profitable calls till expiration day anyway. So everything is fine... Thanks for all the really good help I have received on this.
Yes, that is what I do..I buy calls and when they rise in value, I then turn around and sell them to close them out to take the profit. I have no desire nor intentions in purchasing the stock at the stock price. Now for your math..If you buy 5 Calls of XYZ @$9.00 the cost would be $900.00 for each one x 5= $4,500 (since each call represents 100 shares..100 x $9.00= $900. x 5 = $4,500. They rise to 15 then each one is now worth $1,500.00 ($15.00 x 100 = $1,500.00 x 5 Calls = $7,500.00) So you would receive $7,500.00 - your cost of $4,500 = $3,000.00 Profit on your 5 Calls (minus commission) So you make $3,000 profit on your 5 Calls investment of $4,500.
Just to be precise, it is not a broker who has a policy, but it is the Options Clearing Corporation (OCC) that has the automatic exercise rule for options which are more than $0.25 ITM at expiration. You should really know the instruments you're trading, guys.
Thanks Star that cleared it up for me. i also have no intention of buying the stock and was pretty sure that I needed to just close it out but wasn't 100% sure, now I know thanks. As for my math I was figuring $600 per contract forget the x 5 =$3000. thanks.