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Subject:  way in the money Calls Date:  10/30/2020  12:56 PM
Author:  jpfooligan Number:  8619 of 8621

I got really lucky and out-kicked my coverage on this one... my standard MO is to buy a call that has a long target date (well over a year out) and sell or roll it for a modest profit near expiration... I have never exercised one and bought the stock. But what happens if the option is SO far in the money that it is worth 2 to 3 times capital required to exercise the option? Does the capital gain transfer to the stock?

Let's say I bought a January 2021 call for $12 ($1,200 invested) for a stock with a strike price of $115. And let's say that stock is now trading north of $450. The capital required to exercise the option and buy 100 shares is $11,500, but the call is currently trading over $350, so the value of the option is over $35,000. If I exercise the option, what happens to the $32,000+ gain? What happens to the initial $1,200? Do I only need $10,300? Trying to mitigate (or defer) the LT Cap Gains...
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