Personal Finance & Money Asked by Reahreic on December 20, 2020
About 6 months ago i purchased a few calls on a security that i’m interested in and believe will go up over the mid to long term. Unfortunately the security despite having a positive quarterly result with some upwards improvement hasn’t moved as much as i’d hoped and my calls are about to expire worthless.
I’m looking for advice on exercising them OTM 1 day prior to expiration. I have a few long shares already and still believe the company will reach my strike price within the next 6-12 months. (Covid could drag that out to 24, but they’re not at risk of bankruptcy and are looking to be bought)
Is it worth it to take the ‘paper loss’ of being down several percent on what will ultimately be a long position or accept the actual loss of the options expiring worthless?
I can't speak for all brokers but my broker does not allow the exercise of OTM calls. And why would you do so? Why would you pay more for the stock (the strike price) when you can buy it for less on the market?
The reality is that unless some miracle happens and the stock rises sharply before they expire, making them either salvageable or profitable, there's nothing you can do and they will expire worthless.
Now if there is some time remaining until your calls expire AND there's some premium remaining AND they are not too far OTM, it might be possible to do a repair strategy. However, without specific details, I'm not go to suggest that it's a viable solution.
Correct answer by Bob Baerker on December 20, 2020
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