Question

This question is about Options Trading, Pls, elaborate the following statement:

1- If you don't have enough buying power to exercise, We'll sell your contracts about an hour before the market close.

2- what does it mean to exercise options upon its date.

Answer 1

1. If the option is in the money, but the trader does not have enough buying power, that is not enough cash in the account to buy the shares. Then there will be an attempt to sell the position.

For example, if you have 12 contracts, but only enough cash to only buy 600 shares, an attempt will be made to sell 6 contracts and allow 6 contracts to be exercised for a total of 600 shares.

2. Every option has a expiry date, and after the expiry date the option becomes worthless,

A trader should exercise his option, if it is the money, one day before the expiry date otherwise the option will expire worthless.

To exercise means to out the right of the trader into effect. Options gives the option holder, the right but not the obligation to buy or sell a specific security at a particular exercise price.