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I may have overlooked something. In the September 18, 2009 Options Weekly talking about LEAPS and other strategies, there is a caution to not in invest in more calls for a stock than you can afford to buy. I thought the idea of calls was that after you paid the premium and hopefully the stock later appreciated a lot, you did not actually have to buy it to realize the gain. I thought the broker (Scottrade, Ameritrade, Options Express, etc) would at expiration make one grand transaction of selling the shares one controls and subtracting the cost basis, ie, the strike price times the number of shares controlled.

That article said:

"Don't go crazy buying calls if you can't later afford the underlying stock."

In other words, say the call option was for 10 options for a strike price of $100 and at expiration the stock was at $200 per share. Surely I do not have to purchase the entire 200 shares at $100 ($100000) in order to sell it at $200 a share to get $200000, do I?

I have been under the impression all along that the transaction was automatically done for me with no further outlay.

Right or wrong? Is my alternative to close the transaction at a profit prior to expiration?

John
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I am guessing you are a subscriber to Motley Fool Options. This is a public discussion board, so we won't be talking about service-specific issues here, but you should definitely ask your questions over on the TMF Options forums.

Fuskie
Who wishes you luck getting an answer...
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OK thanks, it looks like my first problem is finding out how this works.

john
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It's not a problem, it's a Foolish adventure!

Fuskie
Who is confident you will quickly find your way and discovering a more Foolish way to invest...
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