Exercise call option scottrade
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For example if you sell a call with a strike price of on a stock trading at a share you hope the price will either remain stable or lose value Investopedia.
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This is a real danger when you exercise an option prior to expiration, and is something that many investors fail to recognize. If you own a call option and the stock plunges, your loss is limited to the value of the option.
But, if you converted your calls to stock, your loss becomes essentially unlimited when the stock declines rapidly. Some investors exercise the options when expiration arrives, planning on unloading the shares when the market opens the following Monday.
This involves an unnecessary risk. Why take that chance? Sure, the price may be higher and you reap an extra profit. Just sell your calls before the market closes Friday. Each of the problems listed above occurs when you exercise an option.
It may pay to accept those costs or risk, if there were something to gain. But exercising the stock and holding it gives you all the risks of a stockholder, with no benefits.
If you want to maintain a long position in the same stock, sell your old option and buy another option with a later expiration date. Further Reading, Options Trading: