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Chapter 22 – When and When Not to Exercise An Option Early

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The main consideration for an option is that you will exercise it at a time. That is, you will exercise your right to buy the shares at a certain price for a call option or to exercise the right to sell a stock for a put. Either way, you would be buying or selling it at the strike price that you agreed upon when you entered the option. You also have the choice to exercise that option before that expiration date without having to wait all that time to get into it. This is provided you have an American option that lets you do this. You can get out of a transaction early to take advantage of the value of the stock at a given time. This is because you could get a profit from the option provided that the option is in the money and that you have an option that is going to give you a sizable profit.

However, you should still look at what might happen when you want to exercise an option. You might feel that a certain time is perfect for you to get out of an option. At the same time, there might be cases where it is better for you to just stick with exercising an option when it actually expires. As appealing as it might be to get something out there, you should still be cautious.