Message Font: Serif | Sans-Serif
No. of Recommendations: 0
"don't you just buy calls in the hopes of profiting on exercise?

Too many option rookies believe that the goal of buying options is to exercise.

If you NEVER exercise an option you buy, you will be far better off.

Exercising costs you the remaining time premium in the options and it far better to sell.

The decision to exercise (for those who do make that mistake) should never be based on the break-even price. That is totally irrelevant.

Why would you want to exercise a call and buy stock. You must pay he interest to own the stock. The margin requirement is higher to own stock. You pay an exercise/assignment fee to own stock. It's a bad, bad idea.

When you no longer want to own the position, you should sell it. And you are allowed to sell for a loss. You cannot profit from every trade.

Question: Can you please tell us where you got the idea that exercising was the thing to do?

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.