What will happen if CALL OPTION expire IN-THE-MONEY without sufficient funds?
What will happen if CALL OPTION expire IN-THE-MONEY without sufficient funds?
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wonderful world · External communityPost link
External question — Personal Finance Stack Exchange
Author: wonderful world
Original post: https://money.stackexchange.com/questions/126870
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
Suppose a novice trader opens an online account with $5,000 with online trading platforms like e*trade, Ameritrade or Robinhood.
With the stock at $175, the trader buys 2 call options:
Option Price: $20
Strike Price: $200
Expiry: 6 Months from now
Cost: $4,000
On the last day of trading, the stock is $215 and the $200 call is in-the-money. The trader is not available to
close
the option. I assume that he now owns 200 shares of that stock which costs $40,000.
Questions:
His account has only $5,000. What will happen if he does not have $40,000 to buy those stocks?
Does a margin account allow him to buy the stock and then sell in a few days when he is available, realizing his profit?
Do online brokers like e*trade or Ameritrade permit closing the option for whatever price a day before the expiration? I think this option can protect him from owning the stocks.
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Quoted from Forex.com.bd-Editorial External question — Personal Finance Stack Exchange Author: wonderful world Source score (net votes, not local likes): 1 Original post: https://money.stackexchange.com/questions/126870 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Suppose a novice trader opens an online account with $5,000 with online trading platforms like e*trade, Ameritrade or Robinhood. With the stock at $175, the trader buys 2 call options: Option Price: $20 Strike Price: $200 Expiry: 6 Months from now Cost: $4,000 On the last day of trading, the stock is $215 and the $200 call is in-the-money. The trader is not available to close the option. I assume that he now owns 200 shares of that stock which costs $40,000. Questions: His account has only $5,000. What will happen if he does not have $40,000 to buy those stocks? Does a margin account allow him to buy the stock and then sell in a few days when he is available, realizing his profit? Do online brokers like e*trade or Ameritrade permit closing the option for whatever price a day before the expiration? I think this option can protect him from owning the stocks.
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