Let's look at Jun options for SPY hypothetically. http://finance.yahoo.com/q/op?s=SPY&m=2011-06 Say someone has $2,000 in their account. That's enough to buy 14 shares of SPY, but they think that SPY is going to go to 150 sometime in May and want to make more money. If they outright bought it, they would have: 14 shares of SPY ($133.64 * 14 = $1,870). Say they are right, and SPY goes up to $150 per share. Their 14 shares are now worth $2,100 for a gain of $230. Say instead they decide to buy as many 140 strike call options as they can, currently at an ask price of $0.40. At $40 each, our hero will get 50 options (ignore commissions for now) for a total of $2,000. Now, say SPY gets to $150 sometime in May. Our hypothetical person decides that they don't want to wait until expiration, so they exercise their options now. They now have the right to buy 5,000 shares of SPY at $140, which would cost $700,000. Except our guy doesn't have that much money, so it would seem that buying 5,000 shares of SPY is out of the question, right? If he had the money, he could buy the 5,000 shares and then could immediately sell it for $750,000 (5,000 * 150) netting a profit of $50,000, but what happens here because he doesn't have the money to buy the shares in the first place, even tho he has the right to do so if he wants? Is his alternative to SELL his call options, and if so, will he get roughly $50,000 for them (so they are going to be priced at roughly $10 each)? What happens if no one wants to buy his options? Is he screwed?