I've been looking more into options trading and I understand most of it except closing the trades and the technicalities of working an order. Say I bought 2 contracts (calls) of a 20 strike at say a dollar premium to make it simple.
2 decisions for me: Say the price is at 24 before expiration and I'm considering on closing. Do I have at that moment then actually have to buy shares at 3800 at close? Or can I just "sell the contract" and automatically, I will make the equity of 600 with the share price at 24..without actually having to go through the process of buying thousands worth of shares? As well, am I actually required to have that much money to cover the extra buying and selling? I know that in selling covered calls, you should have the money (unless you're on margin) but in terms of buying options, as long as you can afford the premium, shouldn't you technically do this trade and have the exchange happen in the backend?
Let me know if my math is wrong. I hope I make sense. I apologize if I'm asking all the wrong questions. If someone can explain the technicalities of closing an option before expiration and at the end, that would be great.
Submitted April 17, 2017 at 04:38AM by salmark http://ift.tt/2pp5aKw
