Hi, I'm not that new to option theory but I have never done any option trading in reality and have a question about the mechanics of the process. I'm pretty up to speed on the concepts of buying and selling puts and calls, but something is bugging me. Suppose you bought 100 contracts of April $2 calls for $0.05 each for some stock, XYZ, currently trading at $1.50. You're thinking that good news is on the way and the price could jump to $2.50. This cost you $500, 100 contracts and 100 shares apiece for $0.05. (Ignoring commissions, and that fact that this isn't a very good strategy, but bear with me for a minute). Sure enough, close to the expiry date the spot price of XYZ is $2.50 due to some announcement, you've hit your target and you want to cash in. Apparently, the position you bought into is now worth (excluding time/volatility premium): ($2.50 - $2.00) * 100 * 100 = $5000 - $500 = $4500. My question is, even though the position is clearly profitable, what if you didn't have enough money in your account to actually exercise the options? You'd need $2.00 * 10000 = $20000 to actually purchase the shares that are now worth $25000 that you could turn around and sell back to the market at spot price to realize the profit of $5000. Would your broker just front you the cash, knowing that you are going to turn around and sell them immediately? Or would you have to arrange financing yourself before you could actually exercise your options.