Basic Options Questions?

Question

If I buy April call for 08, does that mean I can exercise it anytime between now and April 18, 2008? I'm talking about American options.

And say I buy a 90 call and the stock price is $100. If i wanted to exercise the contracts do I have to have $9000?

Answer 1

Since we're so far out, I don't think you'll find those options available just yet. Most likely you'll just find the Leaps which expire in Jan. of each year.

However, to answer your question, yes, if you had an April '08 call, you could do that anytime before April 18, 2008.


As for how much money you need, that'd depend on if you had a cash or margin account. If it were a cash account, you'd have to have the full $9000 (plus exercise fee, perhaps $10-15). If it were a margin account, depending on your broker, you'd have to have probably $3000-$4500ish to get the stock.

Now, if you've got a lot of time on your option, most likely you'll do better just selling the option rather than exercising it to get the stock. The $90 option might be $14 whereas the profit you make on exercising the option and selling the stock would only be $10 (100-90) not including your option cost.

Hope that helps!