Why would someone exercise a call option 1-2 pennies ITM

Discussion in 'Options' started by noob_trad3r, Nov 17, 2009.

  1. Wont it make sense to sell to close VS taking delivery of stock, paying 3 days interest and taking a risk the stock gaps down on monday.
  2. MTE


    How do you know what the other person has!? Maybe he/she already has a stock position and is using the option exercise to get out.
  3. Maybe the mkt in the underlying stock is very wide...
  4. But I thought a call means you take delivery when you exercise the long call.
  5. MTE


    You do. If you have a short stock position then exercising a call would cover that short.
  6. mike007


    If a stock goes ex divi and the divi amount is higher than the extrinsic premium in the call then it is worth it to exercise.
  7. heech


    Ignoring the other issues others have addressed...

    By your logic, why should anyone ever in the history of the world ever hold a long stock position over the weekend? Why pay 3 days interest and take a risk the stock gaps down on Monday?
  8. Hey, I have had options 2-3 cents OUT of the money exercised on me. I think I'm flat and then come Monday I find I have a position.

    This once happened on a good scale when I was pit trading...me and other locals found ourselves long on monday. It was not pretty as we all tried to get out.
  9. Short put option. I bet it was ITM for a few seconds during the day. Plus you have carrying cost.
  10. I belive everyone is looking into this from the position of someone who knows what he/she is doing.

    Too many rookie traders do not know the rules, gamble with options, never ask questions.

    These people own options, decide not to sell them, and then are amazed when they have a stock position on Monday.

    I'll bet that happens far more frequently than anyone would imagine.

    I'll also wager that this is the one and only reason that so many brokers supported moving the automatic exercise rule to one penny. More commissions for them.

    #10     Nov 23, 2009