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Author: poppix920 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 266713  
Subject: Call Options and reserve funds Date: 12/8/2012 10:01 PM
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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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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259838 of 266713
Subject: Re: Call Options and reserve funds Date: 12/9/2012 1:20 AM
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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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Author: poppix920 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259839 of 266713
Subject: Re: Call Options and reserve funds Date: 12/9/2012 7:21 AM
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OK thanks, it looks like my first problem is finding out how this works.

john

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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259865 of 266713
Subject: Re: Call Options and reserve funds Date: 12/10/2012 1:17 PM
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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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