What does it mean when I exercise my options?
When the owner of an option chooses to exercise its options, he/she is essentially exercising their rights as an option owner to take physical possession of the underlying in the case of the call and then assume a short position in the case of a exercising a put.?
Learn more about exercising options in this episode,?Options Bootcamp 15: Secrets of Exercise and Assignment.
How do I exercise my options?
In most cases when the option is in-the-money and has little to no extrinsic value (the strike price plus the premium is near or equal to the price of the underlying), the owner in may opt to take possession of shares in most cases. Exercising is done to capture a dividend, though there are other reasons that options are exercised.
In any case, contacting the clearing firm or broker and requesting that they exercise the long options is the normal course of action taken when the owner chooses to do so.
When should you take an early exercise?
A good time for an early exercise is when a dividend is about to be paid on a stock. A call buyer is not allowed to receive dividend payments, but you could exercise a deep in-the-money call prior to the ex-dividend date and then become a owner of the underlying stock.