Investing Smarter: Exercise Options on Robinhood
Exercising an option means using the right the contract gives you: a call lets you buy 100 shares of the underlying at the strike price, and a put lets you sell 100 shares at the strike price. On a broker such as Robinhood, you exercise from the open option position in the app, and you need enough cash (for a call) or shares (for a put) to settle the trade. Check Robinhood's help center for its current rules on early exercise and on what happens to in-the-money options at expiration.
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Exercising vs. selling the option
Selling an option usually returns more than exercising it before expiration. An option's price is its intrinsic value (how far it is in the money) plus its remaining time value. Exercising captures only the intrinsic value and gives up the time value, while selling the contract keeps both. Early exercise of a call is mainly considered just before an ex-dividend date, when the dividend can be worth more than the remaining time value.
What happens at expiration
An option that is out of the money at expiration expires worthless. An in-the-money option is normally exercised automatically unless you close it first, which turns it into a stock position that needs cash or margin to hold. Closing or rolling the position before the final trading day avoids an unplanned stock position.
Tracking options positions in Excel
MarketXLS adds options data functions to Excel so you can track strike, premium, and Greeks for positions you hold at any broker. Options data is end-of-day on the Standard plan and real-time streaming on the Advanced and Business plans. See real-time option pricing in Excel and the MarketXLS templates for ready-made options trackers.
This article is educational and is not investment advice.
