Is there a way to exercise a put option without purchasing the stock?
Suppose I had a put option for a strike price of $150 without owning the stock. The price eventually drops to $100 dollars and I decide to exercise the put. Normally, I could purchase all the stock and execute the put, however, I was wondering if there was a way to not have to purchase the stocks and still get credit for the per share difference?
Almost always you can simply sell the put which will usually yield a slightly higher price than buying the stock and exercising the put to sell it. If it doesn't yield a higher price, or it isn't trading actively, then you can buy the stock, exercise the put, and close the usual way.
There is not a way to exercise a put option without purchasing the stock. Exercise is a specific action which means to put into effect the right specified in a contract. In the example above this would mean the right to sell 100 shares of the stock at $150 a share, but you would first need to purchase 100 shares at current market value in order exercise properly.
However, you can sell your long put option to close the position. This is the way to capture gain without needing to first purchase 100 shares of the optioned stock. Be careful when trading options, as the difference between the bid and the ask prices, low volume, volatility, and trading costs may all hurt your returns if not managed accordingly. Using limit orders and vigilantly watching the order is recommended when trading options.
The above statements are for educational purposes. This is a hypothetical example, where the detailed financial information of the individual is unknown. The information above may change, and should not be considered tax, legal, or investment advice.
No. Unfortunately not. But you can sell to close the long put option. This might work out to the same amount.
Option Value = Intrinsic Value + Time Value (+/- Bid Ask Spread & Trading Costs)
You would have the time value, which would be to your benefit, but also the spread between the bid and ask and this might work against you, especially with thinly traded options.
You could try putting in a limit order and watch it. See if you can't get at least the intrinsic value of the option. $50 in your example.
Good Luck! And nice trade.
Mark Struthers CFA, CFP®
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This is for informational purposes only. Your specific situation would need to be taken into account. All information is subject to change. Not to be considered investment, tax, or legal advice.
A put and call option are securities in their own rights. If you were the owner of a put and had the right, but not the obligation, to sell 100 shares of Company A at $150 per share, and that stock fell to $100 per share, then the value of your put would increase dramatically. You would sell the put and recognize the gain that way.