LogFAQs > #949092798

Lopen posted...

I wouldn't expect immediately. I've had sold calls/puts not be exercised until day of expiry despite being "in the money" well before then. I can't really tell you a hard and fast rule just that I wouldn't generally expect immediately.

Thanks! This is good to know. I wouldn't expect a guarantee since you can't really be sure what everyone would do when choice is involved, since some people just might see it's in the money whatsoever and exercise it, while some wouldn't, but it's good to know that's not quite the general practice.

My broker says that if your option is in the money at expiry it will just go ahead and exercise it for you, so I'm assuming that most if not all brokers do the same thing. So if it's in the money at expiry I would expect it to be exercised. But that's very different from expecting it to be exercised any time it gets above the strike price. After all, even if I don't expect AMD to go to $95 by January 15th, and it's not there the day it expires, there is a much more decent chance it spikes there temporarily and then comes back down. If it's not there for a decent period, especially if it's not above it by a decent margin, then I think I wouldn't expect the option to be exercised. This means the likelihood your stock is actually taken lower, as an even higher and sustained increase in the stock would need to happen.

This makes selling covered calls very appealing, I think.

As usual, thanks for your insight.

---

The batman villians all seem to be one big joke that batman refuses to laugh at - SantaRPG