Hey all,
There is a call option on Microsoft which is currently trading at 112.33 a share.
The details of the call option are as follows: [Yahoo Finance]
Strike Last Price Bid Ask Volume 96 12.2 12.5 12.6 1
Since this is an American Option, cant I just buy this right now and exercise it and make an easy profit?
Profit => [(112.33 - 96)x 100] - [12.6 x 100] => $373
Is there anything I am missing?
The price does not reflect real-time data.
Can you please elaborate which price we are talking about here? The strike or stock price?
The option price. Strike price doesn’t change
Oh okay, thank you so much for your help!
Technically you’d be right if your price quotes were accurate. These things tend to be arb-bound though, especially on a large cap like MSFT
I see the Sep $96 calls trading at $12.90 and the stock at $108.12
108.12 - 96 - 12.90 = -0.78 per share
What you’re paying for in that 78 cents is primarily the time value left between now and the 21st. Generally there’s only one good time to actually exercise an option, and that’s to receive a dividend. Otherwise your stock is priced in.
Here’s a helpful blog post on that topic: https://www.optionsplaybook.com/managing-positions/early-options-exercise/