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If you own a call option and the stock price is higher than the strike price, then it makes sense for you to exercise your call. This way you can buy the stock at a lower price and immediately sell it to the market at the higher price or hold onto it for long term.
If you do exercise your in-the-money call early and buy the stock, but then the stock falls below your strike price before expiration, youll really have egg on your face. In this case, you could have let the option expire worthless and bought the stock at a lower price on the open market.
You can choose to exercise your call option if it is in the money, meaning the strike price is lower than the stock price. For example, if the strike price is $30 and the stock price is $20, exercising would not make you money because you can purchase the stock for $10 less than the strike price.
Generally speaking, the greater the current value and the less the future value, the more likely it is that youll want to exercise. This may be true even if the price is lower today than what it was at one point in the past.
To exercise an option, you simply advise your broker that you wish to exercise the option in your contract. Your broker will initiate an exercise notice, which informs the seller or writer of the contract that you are exercising the option.

People also ask

Occasionally a stock pays a big dividend and exercising a call option to capture the dividend may be worthwhile. Or, if you own an option that is deep in the money, you may not be able to sell it at fair value. If bids are too low, however, it may be preferable to exercise the option to buy or sell the stock.
Although there are many types of options in the stock market, there are broadly two types of options namely, Call and Put.
Exercising an option is beneficial if the underlying asset price is above the strike price of a call option or the underlying asset price is below the strike price of a put option. Traders dont have to exercise an option because it is not an obligation.
Assume a trader buys one call option contract on ABC stock with a strike price of $25. He pays $150 for the option. On the options expiration date, ABC stock shares are selling for $35. The buyer/holder of the option exercises his right to purchase 100 shares of ABC at $25 a share (the options strike price).
When you convert a call option into stock by exercising, you now own the shares. You must use cash that will no longer be earning interest to fund the transaction, or borrow cash from your broker and pay interest on the margin loan. In both cases, you are losing money with no offsetting gain.

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