Commissions/Exercising ITM option

Discussion in 'Options' started by DeltaSpread, Jul 11, 2011.

  1. This has never happened to me before. If you are long a decent amount of stock (which is underwater) and also put options for that stock which are in the money, what is the cheapest way to get out? In other words say today was expiration day, can I avoid having to make two separate trades which would basically amount to me legging out of the positions within moments of the other?

    If I do nothing and held through the expiration, would the shares automatically be put away/sold for me since the puts are in the money and count as one single trade as opposed to me manually closing to sell the puts and sell the stock as two trades?

  2. spindr0


    If the amount of TP in the puts exceeds exit cost, you're better off closing the position with a combo order. If the put is trading below parity, exercise it to close the stock position.
  3. rmorse

    rmorse Sponsor

    If you are long an ITM put and stock 1:1, you are better off exercising the put. If it's in the money, it's automatic. You should check with your clearance firm with instructions. That way, on the odd ball chance that something happens before expiration, where the stock shoots up through the strike price, you can sell out the stock and do better. In most cases the commission will be the same or less than the exercise.