Question By Fola "Do I Have To Exercise To Take Profit On Call Options?" I bought a call option. If the underlying stock went up in value as predicted, do I have to buy the stock (exercise) then resell to close and lock in profit? Asked on 6 July 2009 Explosive Options Mentoring Course Find Out How My Students Make Over 40% Profit Per Trade Consistently Through Options Trading In The US Market Even During An Economic Downturn! Answered by Mr. OppiE Hi Fola, If your call options are already in profit, there is no need to exercise it in order to take profit. In fact, if there is still time to expiration remaining in those call options, you would make a higher profit if you simply sell the call options at its higher price now rather than to exercise, due to the extrinsic value remaining in the call option. Remember, in options trading, you have the RIGHT but not the OBLIGATION to exercise the options that you bought. Here is an illustration: Assuming you bought 1 contract of AAPL's July $130 Call options at $3.50 when AAPL was trading at $130. AAPL rises to $138.61 and those call options are now trading at $9.40. There is still 2 weeks to expiration and you wish to close the position and take profit. Option 1 : Exercise the call options and sell the stocks You exercises the call options to buy AAPL at $130. You instantly sell it for $138.61, making $5.11 in profit ($8.61 - $3.50). Option 2 : Sell the Call options You sell the call options at $9.40 and makes a profit of $5.90 ($9.40 - $3.50). As you can see above, selling the call options gives you a higher profit due to the extrinsic value still remaining in the option. Those extrinsic value goes to waste if you exercise the call options. Also, exercising an option involves more commissions than simply selling those options. This is why options traders rarely exercise call options unless they are doing so in order to hold the stock for the long term, never to resell in order to lock in profit. In conclusion, if you own profit call options positions and wish to close the position and take profit, the best way to go is to simply sell those call options using the Sell To Close order rather than to exercise them. You should exercise profitable call options only when you decide to own and hold the stock itself for its longer term investment value. $29.90 Only! High Yield Covered Call: Finding the Perfect Stocks For Covered Calls Perfect for all Options Traders! Original eBook by Optiontradingpedia.com, the number one online options trading encyclopedia! This eBook Covers: The Secret to looking for the PERFECT stock for Covered Calls The number of ways to write Covered Calls The two ways of measuring Covered Call returns Most Importantly, how to automatically look for high yield Covered Call opportunities to make up to 25% a month! This $29.90 eBook teaches you all these and more! Average Reader Rating : 4.5 / 5 Optiontradingpedia.com is a Masters 'O' Equity company and uses Masters 'O' Equity payment gateway Response by Fola ... Reply by Mr. OppiE... Response by Others... Add Your Response Here

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