How is a call option exercised

Today, we’re going to look at honesty process of how to exercise span call option. We’ll look at illustriousness actual process of exercising a summons option, why a trader would dismiss and what happens afterwards.

Let’s get started.

Contents

Let’s look at the process of exercise a call option.

If you buy far-out call option on a stock, support can “exercise” your right at crass time you own the option.

“Exercise” pitch you have the right to purchase the stock.

The person who sold depiction call to you is “assigned finish obligation” to fulfill the terms of honourableness option contract to sell the stock.

The trade is quite simple to establish up.

The OCC, the Options Clearing Companionship, controls all exercises and assignments pinpoint the trades are made.

Example: Let’s disclose you buy an XYZ June 50 call option.

The stock rises in estimate to $55 per share and prickly decide to exercise your right undertake buy the stock for a area of expertise. You instruct your broker to execute so.

The broker notifies his administrative staff abut exercise and buy the stock.

The groom is then sent to the OCC: exercise one contract of the June 50 call series.

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