Ok, a few questions...

First, if I buy a call with a strike price of say $5, and we'll say I paid a $1 premuim.  So far I'm in it $100.  Now say I decide I want to exercise that option.    I'm guessing, I fork out $500 the same as I would if I was just buying the stock at $5 a share, independent of any options.  Then I own 100 shares of xyz and can hold them or sell them the same as I would any old stock.  So I would need at least $600 in my account to do the whole deal. Is that correct?  What if I don't have the $500, then my options are to sell the contract or let it expire right?


Now say I buy (or I guess the term is, 'am long') a put option.  We'll assume the same $5 strike and I want to exercise the option.  Do I buy the stock first, on my own, or is there some magical procedure upon exercising the option that it will buy for me, then "sell it" to the poor shlub who issued the contract? Say the current price of the underlying stock is $2.50.  Now there is $250 in value in the option, can that be used to buy the stock with, since it is immedatly being sold for $500?  Hence, I don't have to front any cash...

Ok, suppose a certain stock was trading at $43 and I had my reasons to believe it was going to $39.  Now suppose there were options with a strike price at $45 that I could pick up for $4 and there were ones with a $50 strike for $8
45 - 4 = $41 break even point
50 - 8= $42 break even point
Oh...  I think I just got it.  question was why buy the 45, when the 50 had a higher break even point, but...  Tell me if I'm on the right track.

1 contract at with a $50 strike price = $800
2 contracts at $45 strike = $800
Same investment.

Stock goes to $39 as expected.

50 - 39 = 11
11 - 8 (premium) = $3/per share
3 * 100 (1 contract) = $300 profit

45 - 39 = 6
6 - 4 (premium) = $2/per share
2 * 200 (2 contracts) = $400 profit

That's sound logic isn't it?

And fianlly, if I exercise a contract, how long does it take before the whole thing is complete?