So I'm holding some APR 10 calls right now that I bought for .45 The stock price is now 10.71. Bid price on the calls are .65 Am I thinking correct that I will make more money by exercising them and selling the stock rather than sell the option contracts? I'm using IB broker. stock is AXL
1) "Work" the middle of the bid-ask spread. 2) "Shave" some pennies or a nickel off of the offer price of the option. You ought to get filled.
AXL is 10.70 bid at 10.71 offer. The APR 10 call is 0.65 bid at 0.80 offer. Offer the calls at 0.75. If you really want out now then offer the calls at 0.70. With the bid on AXL at 10.70 selling the calls at 0.70 is better than paying for an exercise.
But at .75 offer I'm only making .30 per contract having bought at .45.....and if I exercise I'm making $68 per 100 shares. Isn't that right? unless the fee to exercise is gonna eat my profit. I'm not sure what the fees are with IB, have to check that out. Looks like no fee to exercise.
AXL is 10.65 bid at 10.66 offer. The APR 10 call is 0.65 bid at 0.80 offer. Take it! The advice to work the middle of the spread is good but never lose sight that while chasing a nickel (or more) you can lose a lot more if the UL drops and a chunk of the gain is lost. Had the call continued to trade under parity, as you surmised, you could have nabbed the difference by exercising the call and shorting the stock now. Always make sure the stock is borrowable first.
You have no idea what you are talking about. Ignoring commissions, selling the APR 10 call option at 0.70 is exactly the same as selling the stock at 10.70. Selling the APR 10 call option at 0.75 makes you $5.00 more.
No, because you paid .45 for the calls, your cost for the stock when you exercise would be 10.45 net of comms.
Gotcha.....that's the part I missed....forgot to add what I spent on the options. Thanks for the help everyone.
Now that you understand make a decision to do something. AXL is now 10.75 bid at 10.76 offer. Day low was 10.13.