4 ms·

How many people who trade options actually call up the shares at the end or vice versa? I'd imagine very few and even fewer on Robinhood's platform. I think a l

• totalZero 9y ago
  > How many people who trade options actually call up the shares at the end or vice versa? In-the-money options are automatically exercised by OCC at maturity, unless the holder contacts them and tells them to do otherwise. American listed single-stock options are physically settled, meaning that you either exercise them for stock, or you don't exercise them at all. If you're short in-the-money options, you generally assume they will be exercised. Also, if you have a deep in-the-money call option on a stock that pays a dividend, you may need to exercise it to capture the dividend. You will lose money if you fail to exercise. Option exercises are sometimes contrarily decided (that is, not exercised when they are in the money) if the holder of a very large option position has a hedge that cancels out his stock delivery. In practice, this is infrequent, and you usually only do it when the market impact of trading out of your residual shares will lose more money than the intrinsic value you forgo by failing to exercise your options. Robinhood will liquidate options prior to maturity if the holding account cannot afford to exercise them, but (A) this is done at a loss and (B) this will not happen if the account has enough capital to perform the option exercise. "Up options" and "down options" are not a clarification nor a level of abstraction. Rather, they are a misnomer that suggests a false level of simplicity.
• acchow 9y ago
  No. This level of abstraction hides the fact that your call option can drop in value even if the stock goes up tomorrow.