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Exerise or not to exerise-Question


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Exerise or not to exerise-Question

  #1 (permalink)
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Exerise or not to exerise-Question

Hi
Earlier this week, I bought a couple of options on AAPL. Earlier today dividends were announced. so I got this message from IB :
"Dividend-Triggered Option Exercise Advisory"

Basically saying I can exercise and collect dividend. How would you make that call? What factors will make you decide either way. My calls are at BE but with today's action, they should be ITM tomorrow. I only have two more days to expiration. I have two calls and dividends are .77
I am asking because I don't know what to do! This is a first for me.

Thanks,
K

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  #3 (permalink)
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Hey...


Do you want to own AAPL stock?

That is the primary question here. I do own AAPL. I am also short puts, which is a bullish position.

So, if you are cool owning AAPL at your strike, and you are ITM do the early exercise and collect the dividend if doing so is a beneficial workout. .77 is the calculus as that is what you get in dividends.

How much could you sell next friday same strike calls for. You could collect the dividend and that premium. Where are the same strike same ex puts?

No pun intended, there are a lot of options.

Do you have an opinion on the stock?


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  #4 (permalink)
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When I was figuring out options...

as a strategic investment. I would make a little work out table to understand what outcome was most consistent with my goals and opinion on the stock.

-Dan

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  #5 (permalink)
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AAPL

Hi Dan,
I do like Apple as well, but 200 shares would use up all of my capital plus margin. I a little out of the money still, but if I did exercise I can sell the following day. Of course with all the volatility we have this week, I am probably better off getting out of my calls with profit. Assuming, we move up tomorrow!
Thank you very much for the feedback and now I know that I should never buy a stock, just sell the puts until assigned. Seems like a good way to buy at discount, right?

Take care,
K

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  #6 (permalink)
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Well...

selling puts is a way to participate long, just like buying the calls.

Generally most options are bought by retail and sold by the floor. There are many nuances but I look to sell high implied volatility (high premium) and buy lower implied volatility options.

In a nut shell, if you get a double on your long calls sell half. This position has only two days left so decay (theta) will work against your longs real fast.

You are correct, if your calls go in the money they will move almost lock step with the stock. Still plenty of time to have a big day % wise. BUT if they are not in the money pretty quick you might want to sell them or roll to next week if it's not too expensive.

Good luck. Let me know if I can help.

-Dan

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  #7 (permalink)
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wldman View Post
selling puts is a way to participate long, just like buying the calls.

Generally most options are bought by retail and sold by the floor. There are many nuances but I look to sell high implied volatility (high premium) and buy lower implied volatility options.

In a nut shell, if you get a double on your long calls sell half. This position has only two days left so decay (theta) will work against your longs real fast.

You are correct, if your calls go in the money they will move almost lock step with the stock. Still plenty of time to have a big day % wise. BUT if they are not in the money pretty quick you might want to sell them or roll to next week if it's not too expensive.

Good luck. Let me know if I can help.

-Dan

Very good information Dan. I may take you up on again on the "let me know if I can help." Again, thank you.

K

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  #8 (permalink)
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Anytime man...

tag me and I'll do my best if I have anything valuable to share.

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  #9 (permalink)
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yay Kareem

@kareem40

I think you should be ITM on those long AAPL calls.

Way to go man. Please report how you did.

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  #10 (permalink)
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wldman View Post
@kareem40

I think you should be ITM on those long AAPL calls.

Way to go man. Please report how you did.

Hi Dan,
They are doing okay, but since they are out of the money ( 202.5) and expiring tomorrow. Theta is doing its thing. I have a profit limit and, with no new Trump tweets, I should be out with some profit. But not much. I will post my P&L in the Journal, later today.
Again, thanks for all the help. I decided not own Apple, for now.

K

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