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 should not exercise your options early. I recently got an email from somebody and they wanted to know if it was a good idea to exercise their long call option early. They had bought a long call option ahead of earnings. The company had great earnings and now, the stock was really moving higher. And so, they wanted to know – “Hey, look. Should I exercise my long call option, take delivery of the stock because I made frankly, a guess in a lucky trade that the stock went the direction I thought it was going to move and it made a big move, so now, do I want the stock?” The answer to this question is almost emphatically no, you do not want to exercise your option contracts early because what you give up if you're a long option buyer during early exercise of your contract is you give up the extrinsic value that is still left in option contracts. Remember, option contracts are co