Write an article based on this "Evaluate the cost in exercising the option. Analyze the option's potential. Instruct your broker to sell your contracts. Check your account balance."
In some situations you'll be better off selling your option than exercising it. Particularly if you have to first buy the underlying stock, you may have to pay additional commissions and fees. For example, if you have a put option, you must first own the underlying stock before you can exercise the option to sell it at your strike price. You'll typically pay commissions on the initial stock purchase, and then additional commissions and fees when you exercise your option. Your costs may be lower if you have a call option, since you don't have to buy the stock beforehand. However, your broker's fees still may be lower for selling the contracts themselves than for exercising the options. You can calculate the basic value of an option by comparing the strike price to the actual price of the stock. However, there are other external factors that can affect the value of an option to another investor, such as the quality of the underlying stock and its performance. Overall market conditions may affect the value of your options, as well as the general performance of the underlying stock and the supply and demand for shares. To perform this level of analysis, you should be generally familiar with the stock market and understand the performance trends in the sector of the underlying stock. You may be able to get assistance from your broker if you need help making the decision to sell your options. If you have an online broker, you typically can sell your options contracts with the click of a button. You don't need to own the underlying stock to sell the contracts themselves. When you sell your options contracts on an exchange, you may capture more value because you can take advantage of any value added by external factors, such as demand for the underlying stock. Discuss any questions you have about pricing with your broker before you execute the sale of your contracts. Once your options are sold, your profit will be deposited into your trading account, less any commissions or fees for the transaction. Since no stock was traded, this is a cash transaction.