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Exercising Versus Trading-Out
So far we've talked about options as the right to buy or sell (exercise) the underlying. This is true, but in reality, a majority of options are not actually exercised.
In our example, you could make money by exercising at $70 and then selling the stock back in the market at $78 for a profit of $8 a share. You could also keep the stock, knowing you were able to buy it at a discount to the present value.
However, the majority of the time holders choose to take their profits by trading out (closing out) their position. This means that holders sell their options in the market, and writers buy their positions back to close. According to the CBOE, about 10% of options are exercised, 60% are traded out, and 30% expire worthless.
(Source: Investopedia)
depend on what options exchanger u r dealing with.....
exo18v ( Date: 17-Nov-2010 20:28) Posted:
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Hi all, i am new to stock market, i like to how do i exercise options in my stock that i have purchase ?