It is usually not wise to exercise an index option prior to its expiration because the investor would lose any amount of time value contained in the options premium. Additionally, if the investor exercises their option at 10:00 AM the investor will receive the in the money amount, as of the close of the market that day. It is quite possible for an investor to exercise their in the money option at 10:00 AM and have the option be out of the money at the close of business because the market moved against them. In both scenarios, it is better to sell the option.

Need Help Passing Your Series 4 Exam?

Index Option Positions

Related Articles
  1. Financial Advisor

    The Best Strategies to Manage Your Stock Options

    We look at strategies to help manage taxes and the exercise of incentive and non-qualified stock options.
  2. Trading

    Dividends, Interest Rates And Their Effect On Stock Options

    Learn how analyzing these variables are crucial to knowing when to exercise early.
  3. Trading

    Exploring European Options

    The ability to exercise only on the expiration date is what sets these options apart.
  4. Trading

    American Vs. European Options

    These two options have many similar characteristics, but it's the differences that are important.
  5. Trading

    Options Hazards That Can Bruise Your Portfolio

    Learn the top three risks and how they can affect you on either side of an options trade.
  6. Personal Finance

    What You Need to Know About Your Stock Options

    Know these things and talk to a professional to get the most out of your employee stock options.
  7. Investing

    What are Options Contracts?

    An explanation of options contracts, call options and put options.
Frequently Asked Questions
  1. How Did Kidder Peabody's Joseph Jett Lose $350M?

    The 1980s were a rough decade for Kidder, Peabody & Co. thanks to bond trader Joseph Jett.
  2. What Is a Blank-Check Company?

    A blank-check company has a business plan based on a merger or acquisition with another company.
  3. How Can Trading Volume Exceed Shares Outstanding?

    The number of shares traded can be greater than the number of outstanding shares, but it's rare.
  4. Why Do a Reverse Merger Instead of an IPO?

    Reverse mergers are often the most cost-efficient way for private companies to trade publicly.
Trading Center