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Exercising a Call allows you to buy the underlying position at the strike price, if the account supports the exercise. You decide how long to hold the position open as long as the account continues to support the shares.
What happens if I buy a call option out-of-the-money?
When the stock trades at the strike price, the call option is at the money. If the stock trades below the strike price, the call is out of the money and the option expires worthless. Then the call seller keeps the premium paid for the call while the buyer loses the entire investment.
Is it better to exercise an option or sell it?
Its ALL about the extrinsic value remaining in your calls. When you exercise an option, you forfeit all remaining extrinsic value in the option. So it is almost always better from a financial standpoint to sell the options and buy the stock.
What happens if you dont have enough money to exercise call options?
If your long option is ITM at expiration but your account doesnt have enough money to support the resulting long or short stock position, your broker may, at its discretion, issue a do not exercise (DNE) on your behalf, and any gain you may have realized by exercising the option will be wiped out.
Do I lose my premium if I exercise a call option?
No. The premium is gone forever. People usually sell to close prior to expiration rather then exercise in order to capture the remaining intrinsic value of the options. There are a few cases where it makes more sense to exercise rather then sell to close but theyre rare.
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Related forms
Form IT-201 Resident Income Tax Return Tax Year 2024
Do you lose the premium if you exercise an option?
The purchaser of an American-style option owns the right to exercise (buy or sell the underlying security at the predefined price) at any time up until the expiration date. The seller of the option is obligated to meet the terms of the contract. However, it does not always make sense to exercise the option.
Related links
Form 3921 (Rev. April 2025)
Box 2. Shows the date you exercised the option to purchase the stock. Box 3. Shows the exercise price per share of stock.
(a) When exercising an option, the contracting officer shall provide written notice to the contractor within the time period specified in the contract.
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