Exercising option purchase 2025

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Exercising the option means you have opted to purchase the shares at the strike price when a long call, or sell the shares at the strike price if its a long put.
For a put option buyer, the maximum loss on the option position is limited to the premium paid for the put. The maximum gain on the option position would occur if the underlying stock price fell to zero.
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.
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.
The only time one ``receives a premium in option investing is when one Sells To Open a put or call position. The premium is deposited to the sellers brokerage cash account, but the funds are put on hold until the option position is closed or expires.
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You do not get the premium back. Typically, you would sell the contract to realize the extrinsic and intrinsic value.
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.

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