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Is it wiser to exercise a call option when market price is lower than the strike price?
Wiki User
∙ 12y ago
No. That would be an incredibly bad thing to do.
A call gives you the option to purchase a certain amount of a certain stock for a certain price on or before a certain date. Say, 100 shares of 3M for $90 with expiration date of September 2011, and you paid $2 per share premium. The reason you want this is to make money on the upside: you think the stock will go over $92, so you buy a call, wait till the stock goes over $92, exercise the call and sell the stock immediately, pocketing the difference between the $92 you paid per share ($2 premium plus $90 for the stock) and the money you earned by selling the stock.
That's all well and good if the stock goes up to $97--you earn $5 profit. If 3M is trading at $87, though, you'd be better off blowing off the option (which you can do--it's an option not a futures contract) and buying the stock on the open market.
And that, fine questioner, leads us to the First Rule of Options: Never exercise them unless you can make money doing it.
Wiki User
∙ 12y ago
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What does it mean that a stock option is in the money?
An in-the-money option is one that makes financial sense to exercise. In-the-money puts are ones where the security's open-market price is lower than the option's strike price. In-the-money calls are ones where the security's open-market price is higher than the option's strike price.
In the area of stock market trading what does butterfly spread mean?
A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration but three different strike prices to create a range of prices the strategy can profit from. The trader sells two option contracts at the middle strike price and buys one option contract at a lower strike price and one option contract at a higher strike price. Both puts and calls can be used for a butterfly spread.
Do you have to exercise incentive stock options if market price is lower than granted price?
No, and you shouldn't. If the strike price of your option is $10 per share, and the stock is currently trading at $9, exercising it would get you nine-dollar stock for $10 per share. This is what we options fans call a very bad thing.
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One good exercise is the superman exercise. Lay face down with arms extended in front, and repeatedly lift and lower arms and legs simultaneously. This strengthens the lower back. Another good option would be yoga and pilates exercises. They are non-strenuous and would be good for children.
Does a higher exercise price increase the value of a call option?
No, just the opposite. It decreases the value. Options have two "Prices" associated with the financial instrument. STRIKE PRICE and PREMIUM PRICE. When you use the term "Excercise Price" you are referring to the "STRIKE PRICE." A CALL option is the right to BUY a specific instrument at a specific price. So having the "RIGHT TO BUY LOWER" is always worth more than the right to buy higher. To clarify, if your company offers you 3,000 options at an excercise price of $2, those are worth vastly less than the same options with an excercise price of ZERO. Here's why: An options "Value" is known as the Option Premium (OP). OP is what the option is worth. Time Value + Intrinsic Value = Option Premium So if the market value of ABC Company is $5 and your options strike price is $0 you can cash those in for $5 a share right now. However, if your Option Strike Price is $4 in the same market (ABC stock price is $5) then you only get a dollar on exercision. Who gets the other $4? The company. - - - - - "Higher exercise price" (traders would say "higher strike price") means nothing in and of itself. The big question is, what is the difference between the strike price and the stock price at the time you bought the call? Or, in trader's lingo, how far out of the money is the option? People who sell ("write") options are gambling, and the thing they are most hoping for is the price of the stock staying below the strike price. If this happens the option expires worthless and the writer keeps the premium. That's the ideal. The closer the two numbers are, the more likely the option will be exercised and, therefore, the more likely you're going to have to cough up either cash or stock. SO...the more likely the option is to be exercised, the more expensive it will be. Let's take two options priced at $340.50 per share. That is a ton of money so obviously the premium should be pretty low, right? Not if you're buying calls on Apple--$340.50 was the Friday, May 13 closing price so this call would be at-the-money and therefore very expensive. As in 10 percent, or more, expensive. OTOH, if you were buying $340.50 Caterpillar calls, assuming anyone would sell you a $300-plus call on a $106 stock, you could get into those for about a quarter per share.
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A lower resting heart rate is an effect of exercise and as an athlete is more likely to exercise more regularly then their resting heart is likely to be lower.
