Why do most people sell their valuable options rather than exercising them?

Question

just wondering

Answer 1

less commission.

Answer 2

it's a quick profit.  Options traders are not usually in it to collect the actual stock

Answer 3

(1) They can usually make more money by selling the options. Most options have some extrinsic value (time permium) which would be sacraficed if the option was exercised.

(2) For most people it costs less to simply sell the option. If you exercise the option them close the resulting stock position most people pay two commissions instead of one.

(3) Simply selling the option requires less cash. If you exercise an option you need enough cash to buy the stock (if it is a call) or to satisfy the margin requirement to sell the stock (if it is a put).

Points (2) and (3) assume that the option holding did not already have an offsetting stock position.