ELI5: Exercising vs Selling an Option


I need help understanding this concept. Back when Chegg dipped I bought a call option for $30 expiring on April 14th.

My basic understanding of calls vs puts is guaranteed buy vs guaranteed sell. I figured Chegg had to go back up and that was the extent of my rationale.

However, when I look up guidance online, the internet says you should almost never just exercise an option and most likely sell it instead.

What is the difference? I thought exercising the option secured me the shares which I would then turn around and sell, no? Or am I selling the rights to the contract? I don't understand.


Comments

Leave a Reply

Your email address will not be published. Required fields are marked *