The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about why you cannot exercise an option without the money to actually hold stock. This is actually really kind of a two-part question today because I think what people often have as a misconception is that when they get assigned stock or when they trade an option contract, they have to have the money in place to hold the stock and that’s not necessarily the case. The reality is that if you trade option contracts and you don’t have the underlying capital to hold the stock, that doesn’t mean that you can’t trade the contracts. It only means that if you are assigned or if you exercise the contracts, you’ve got to be able to have the capital in your account to continue the trade. Now, brokers know that in many cases, a lot of people sign up for a brokerage account with $3,000, $5,000, $10,000 and that’s not enough to hold stock in all of these different option contracts. This is why brokers