| A few years ago on a Monday morning, I
| |
| | for further potential increase.To
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| checked my brokerage account and to my
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| | exercise your options you need enough
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| surprise it showed that I had purchased
| |
| | money to pay for buying the stock. Each
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| 1,000 shares of AMD for a total cost of
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| | option contract represents 100 shares of
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| $15,000. The payment for this purchase
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| | stocks, so 10 contracts represent 1000
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| was taken out of my brokerage money
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| | shares of stocks. In our Microsoft
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| market account.Why surprised you may ask.
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| | example, for you to exercise 10 options
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| I had not put an order for this purchase
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| | contracts at the price of $25.00 requires
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| nor did I really intend to buy AMD. I get
| |
| | $25,000 to be in your account. If you
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| to this in a little bit.Had I wanted to
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| | don't have that money, well, you may face
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| sell the stock on that day, I would have
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| | margin calls and some other not so
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| received around $14,500, a loss of $500
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| | pleasant consequence. This is where the
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| in just a few hours. In the end it worked
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| | new change can cause some serious
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| out and I sold that particular stock a
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| | damage.Options are a right and not an
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| few months later for a handsome
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| | obligation except that you have to deal
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| profit.But on that day I had a paper loss
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| | with automatic exercise threshold. This
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| of $500 and if I didn't have enough money
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| | is the threshold the Options Clearing
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| to pay for the purchase, the $500 loss
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| | Corporation (OCC) uses to determine if
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| would have been the least of my
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| | they should exercise your right on your
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| worries.So, how did I end up with a stock
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| | behalf.In the letter I received from my
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| that I did not necessarily want or
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| | brokerage firm, they informed me that if
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| order?Automatic exercise threshold for
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| | the price of the stock is only a nickel
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| equity options is the reason.Today, I
| |
| | ($.05) above the exercise price, that
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| just received the following message from
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| | would mean they will automatically buy
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| two of my brokerage firms that reminded
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| | the stock for me according to this new
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| me of that day."Beginning October 2006,
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| | rule.So what can options traders do not
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| the Options Clearing Corporation (OCC)
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| | to deal with unwanted stocks?First, they
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| will implement a change to reduce the
| |
| | can and should watch the stock price and
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| automatic exercise threshold for equity
| |
| | be proactive in the process especially on
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| options. The current threshold of $0.25
| |
| | the option expiration date. Option
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| will be set at $0.05 for expiring options
| |
| | trading is not by any stretch of
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| that are automatically exercised by the
| |
| | imagination a passive approach. They can
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| OCC. The threshold for index options will
| |
| | also call their brokerage firm and find
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| remain at $0.01."Who cares about a measly
| |
| | out what other alternatives are available
|
| $0.20? You can't even buy a stick of gum
| |
| | to them.Seasoned options traders know
|
| with that.For options traders this could
| |
| | what they should do and the aim of this
|
| mean a huge potential loss, margin calls
| |
| | article is to bring some facts to the
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| and a whole lot of trouble.Let's go over
| |
| | attention of those who are just getting
|
| a few simple reminders about options
| |
| | started.In investing and in life I
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| trading. Options are contracts that allow
| |
| | remember what Robert Grant said, "Men and
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| a person to buy or sell securities, for
| |
| | women everywhere must exercise deliberate
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| example stocks, at a predetermined price
| |
| | selection to live wisely."* DISCLAIMER:
|
| called option exercise price and on/or
| |
| | Vishy Dadsetan, or My Favorite Shop,
|
| before a predetermined date in the future
| |
| | Inc. do not endorse any product or
|
| called option expiration date.Options
| |
| | company. This article and website does
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| represent a reserved right but not an
| |
| | not provide investment, legal, insurance,
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| obligation. In other words, the holder of
| |
| | or other professional services. If
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| this right, that is to say the buyer, can
| |
| | investment or other expert assistance is
|
| exercise this right or not. For example
| |
| | required, the services of a competent
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| if you own a Microsoft January 25 Call
| |
| | professional should be sought. Although
|
| Option, it gives you the right to buy
| |
| | Vishy Dadsetan has made every effort to
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| Microsoft for $25.00 on or before third
| |
| | ensure the accuracy and completeness of
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| Friday in January. It is obvious that you
| |
| | the information contained in this site,
|
| would not exercise your option if
| |
| | it assumes no responsibility for errors,
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| Microsoft is at $20.00. In that case, if
| |
| | omissions, inaccuracies, or
|
| you really like Microsoft, you just go to
| |
| | inconsistencies.© Vishy DadsetanVishy
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| open market and buy it for
| |
| | Dadsetan writes articles that can
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| $20.00.However, if Microsoft soars to
| |
| | actually help your clients. Articles that
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| $40, then you want to exercise your right
| |
| | make
|
| (option) and buy the stock at $25 and
| |
| | sense. Articles just like this one.
|
| turn around and sell it at $40 or keep it
| |
| |
|
