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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1203  
Subject: Re: Help with Options Exit Date: 3/24/2005 2:48 PM
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roygordon,

I wrote, If you buy a contract, you must sell it to close it. If you "Buy to Open", you must "Sell to Close" if you want to abandon that position. This is no different from when you buy or sell stocks - you're just talking about a contract instead of a certificate.

To which you replied, So, I pay another commission to do this?

If so, this would seem to mean that buying any option and then closing out requires two commissions, one going in and one going out.


If you wish to abandon an option position before it expires, then yes you must pay another commission.

Also, Suppose I do a butterfly at 55/60/65 and the stock is at 70 on expiration Friday. Will I wind up owing TWO additional commissions to close out my two long ITM positions?

If you wait until expiration and they expire worthless, you definately won't get charged a second set of commissions. What you get charged if they expire ITM at expiration will depend on your broker. Some may cash out the position without a commission, but you should ask to be sure. For a few brokers, cashing out an ITM position that is about to expire is not automatic; but this seems pretty uncommon these days.

- Joel
Who has spent a lot of time reading about options; but doesn't actually trade them...
(I figure I'll eventually use them for hedging, so I've been trying to develop an understanding of the mechanics early on.)
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