exercise of an uncovered put option

Discussion in 'Trading' started by kingsti, Feb 25, 2013.

  1. kingsti


    New to forum

    Q - I am holding in-the-money "uncovered" put options which expire this Friday 3/1. I wish to exercise these uncovered puts on or before Thursday. I realize I have to notify my broker of the exercise before the applicable cut-off time on the day of exercise .

    Can I exercise if I am naked the positions in my account and have a minimal cash position by instructing my broker to buy the underlying shares at their current market price at the same time I request the broker to exercise the puts. Is this OK as I will have unsettled proceeds from putting the shares covered by option when I exercise the put option, which unsettled proceeds would cover the purchase of the shares to be delivered.

    Hope that makes sense.

  2. I would ask your broker. I imagine it would be okay but since, if I understand you right, you don't have the cash to buy the stock to exercise the option there might be some additional charges.

    Wouldn't it be just as good to close the option trade and take your profit that way?