How do you decide if you should sell a call or use the option to buy and sell more stock?
Asked 5 years ago
Two months ago I bought a GSK call for $45 with strike price at $40 to expire in August. Right now stock value is at $39.50 and the call is worth $110 if sold. This is the first call I ever bought (I usually just sell CCs and CSPs). What would be the strategy here? How will I decide if I should sell the call or use the option to get stock and sell the stock? I do believe it will hit $40 before August so will do nothing till I'm in the money.
Andia Rispah Igobwa
Thursday, June 10, 2021
A call option is in the money when the stock price is above the strike price at expiration. You make a profit from a call option when the premium paid is less than the difference between the stock price and the strike price.
If you exercise the option, you’ll lose some money (extrinsic value). I recommend you sell the option and take the profits.
Also, as time passes, you lose more and more of its intrinsic value.
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