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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.
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"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.
What else can I help you with?
When should you exercise a put option?
You should exercise a put option when the stock price is below the strike price of the option, allowing you to sell the stock at a higher price than its current market value.
When is the best time to exercise a put option?
The best time to exercise a put option is when the market price of the underlying asset is below the strike price of the option, allowing you to sell the asset at a higher price than its current market value.
What is a stock option and how do you use it?
Stock options allow you to buy stock in a company at a certain price, no matter what the price of the stock is currently. There is usually a time period associated with the offer. Sometimes this could be a sweet deal (if the stock is currently higher than the option) to worthless (if the option price is higher that the current stock price). You also don't have to have the funds to exercise the option, you can have a brokerage company exercise the option, then sell the stock at the higher price, with the difference being your profit.
What is excersing a option?
Exercising an option means exercising your rights to buy or sell the underlying asset in accordance to the parameters of the option. When you exercise a call option, you will get to buy the underlying stock at the strike price no matter what price the stock is trading at in the market. When you exercise a put option, you will get to sell the underlying stock at the strike price no matter what price the stock is selling at in the market. In both cases, the option you own disappears from your account.
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.
What causes an increase in the value of an option?
An increase in the market price of the item the option is for.
What is the Relationship between option price and exercise price?
For a call option, the option price is convex and decreasing with increasing strike price, assuming a fixed maturity and same underlying price.
How can one exercise a call option?
To exercise a call option, the option holder can buy the underlying asset at the strike price before the option's expiration date.
What is it called when the price specified in an option contract at which the holder can buy or sell the underlying asset?
The price specified in an option contract at which the holder can buy or sell the underlying asset is called the "strike price" or "exercise price." This is a crucial component of the option, as it determines the conditions under which the holder can exercise the option to buy (call option) or sell (put option) the underlying asset.
How can I exercise a put option?
To exercise a put option, you need to notify your broker that you want to sell the underlying asset at the strike price before the option's expiration date. This allows you to profit from a decrease in the asset's price.
How do option calls work?
Option calls give the holder the right to buy a specific stock at a predetermined price within a set time frame. If the stock price goes up, the holder can exercise the option to buy the stock at the lower price, making a profit. If the stock price stays the same or goes down, the holder can choose not to exercise the option, limiting their loss to the price paid for the option.
How do you exercise a put option?
To exercise a put option, the holder of the option must inform the seller that they want to sell the underlying asset at the agreed-upon strike price before the option's expiration date. This allows the holder to sell the asset at a profit if the market price is lower than the strike price.
