How do I execute a call or a put option on a given stock?

Question

Walk me through a reasonable decision process to place a call ....and or a put......on a stock price of Company A. Then follow through with cashing that out, using proper terminology to describe the transactions. Include details of how to use my trading platform to access the option section. I use presently Scottrade. Thanks

Answer 1

Assuming Scottrade already lets you trade options, you just buy-to-open (long), sell-to-open (short), buy-to-close (cover a short), sell-to-close (sell) any option position just like a stock.

If you have any option position (long or short and call or put) and it is in-the-money by $0.25 or more on the last trading day before expiration, the broker will automatically exercise it. You don't have to do anything, except make sure you have funds in your account to cover the transaction or shares in your account to cover the exercise of a short call position or shares to sell in case of a long put position.

If it is less than $0.25 you will have to contact the broker and tell them you want to exercise it.

Answer 2

I don't know how Scott rade words via your ocmputer, but calling the borker is probably the way to do it. I doubt most trading platforms can execute an option by taking delivery of the stock or selling the stock. In an event if you had purchased a long call you would be taking delivery of the stock at the striking price of your option. If it is a put you will be selling stock at the stricking price. When you execute the option, the broker will buy your stock at the strike, and close out your long call or "sell to close" The other side is the person who wrote the call at the same strike, they would lose their stock and deliver it to your account. If you hold the option till expiration, and there are not in the money, over the strike if call or under strike if put, you don't have to do anything, they just expire and you keep the proceeds. If you did covered call writing (you own the stock and wrote the option) you will lsoe the stock and keep the procedds of the written option. If you wrote an ucovered put, you will be chared the price of the stock for the put price. Go to the CBOE.com and get more explanation