Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I am relatively new to options trading yet not a noice investor by any means. I did however have a question that, perhaps, someone with specialized Foolish knowledge can help me answer.

My question can be best posed with a hypothetical. Let's say I were to buy a call option to buy shares of company XYZ with a strike price of $100 and as with many standardized, exchange listed options, this contract is for 100 shares. Before the expiration of my call option, the price of XYZ stock is trading at, let us say, $150. My option is clearly "In the Money" and I wish to exercise it. One problem though.. let us say I do not have the $10,000 in my account to buy the underlying security (XYZ common stock).

Clearly, the option I hold is valuable as it carries with it the right to buy XYZ shares at below market price. I know one solution is to sell the option rather than exercise it and pocket a lucrative premium. My question is.. is there a way (without having full funding in my account) to have my broker simultaneously excercise the option and sell the underlying security (100 XYZ shares), allowing me to keep the difference between the excercise price and the market price? (the broker would, of course, recieve all applicable fees and commissions out of my "cut") Is there a rule on this matter or can this be something that depends on the broker's policy?

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.