What price are stock options exercised?

Question

MY EXAMPLE:

I sold a call option to buy a stock I own at $3.00. They paid $1.30 per share. So that brings them to a total cost of $4.30. What price would my option get exercised at? (they buy it at the $3.00 price with the option obviously... but what market price would my option get exercised @?)

Answer 1

Unless you are being tricky, it is $3.  .

Answer 2

For all practical purposes, the only advantage of owning shares of a stock over owning a call option on the stock is that the stock receives any dividends paid. On the other hand owning a call option has advatages over owning stock, such as having fewer dollars at risk and fewer dollars tied up.

Consequently, unless there is a dividend due it is uncommon for a call option to be exercised before expiration, regardless of the stock price.

At expiration, a call stock option is usually exercised if it is over the strike price, even by only a penny.

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Put options are different. Deep in the money put options are frequently exercised early. If the bid quote for the option is less than the intrinsic value of the option, it is quite likely it will be exercised early. (For an in-the-money put option, the intrinsic value is the stirke price less the stock price.)

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As an aside, I noticed someone else indicated in his answer that an option is only automatically exercised at expiraiton if it is at least five cents in the money. That changed earlier this month. An option will now automatically be exercised if it is at least one cent in the money at expiration unless the holder of the option gives explicit instruction that the option is not to be exercised.

Answer 3

options are automatically exercised if the stock price is 5 cents in the money unless expressed otherwise by the benefitting party, so if the other party bought the call option with a strike price of $3 it is going to automatically purchase the shares if they reach $3.05 unless the other party decides not to exercise the option

Answer 4

They have the right to call the stock away from you anytime until the experiation date at $3.00 per share. Logically no one will call the stock away until it is over $3.00. The person that bought your call contract paid $1.30, so logically he would not call it away until it was over $4.30 per share. However logic is not always used by everyone, so I wouldn't worry about it until the stock was almost at $3.00, then if you do not want the stock called away, look at how much time is left in the contract, look at what it would cost you to buy back the contract or close the position. You got $1.30 per share, if the stock looks like it is on the move, and the cost to close the position is only .30 cents, you might want to take your profit close out the contract by buying a call and not worry.

It all depends on how much time you have left, how the stock price is moving, and how you feel about selling the stock, even at $3.00!

Good luck.

Answer 5

Depends how many options. They could exercise anywhere above $3 plus expenses. Anywhere between $3 and $4.30 reduces their loss. Say the stock hits $3.50 they could exercise and sell at $3.50. Less $1.30= loss $0.80 rather than lapsing at loss of $1.30 This is assuming the option is about to expire. Most options aren't exercised, are they? Just traded.

Do you mean you sold (wrote) a call option? Giving the buyer the right to call your shares?