Exercise: Your Right to Buy
The good news about exercise is that once you understand the rules and procedures, it is not a mystery. In fact, it is very straightforward. In this chapter, I do my best to help you understand exercise and what actions you can take before the expiration date.
What It Means to Exercise
When you sold covered calls, the stock was called away from you when the call buyer exercised the option. As the call seller, if the stock was called away, you had only one obligation—to deliver the stock. Now that you have traded places and are the call owner, you are the one who gets to do the exercising.
To review, the call buyer (which is now you) has the right to exercise the call option. When the buyer exercises a call option, ...