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This group is for brand new option traders. If you've never traded an option, this groups for you. Although... we would like to have some experienced option traders to help us through the more difficult trades. I will start this group with a simple covered call. This will be my first option trade, so the excitement starts right away. We will be using The Options Playbook as our guide. Everybody can ask all and any questions without the fear of looking like an idiot.

Active Since 10/21/08

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Options for Beginners Forum > What happens to a call option when the underlying stock is sold?

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Grippo

Member since: Feb 09
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Posted July 19, 2009 (07:15PM)
Hello,

I own a $7 call option on JAVA (SUQ JH) which expires 10/17.  What will happen to it when/if Sun sells to Oracle for $9ish a share?  Am I better to hang on to it and let it expire, or should I "buy to close" this position ahead of the sale?

I think I have the terminology/basic concepts of option trading down, but feel free to correct me!

-T
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golax

Member since: Oct 08
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Posted September 29, 2009 (10:49AM)
This may be a little late but here goes.

You should never just let it expire! If it is in the money (which it is today) you will have the option to exercise it and purchase 100 shares of stock for $7 per share. Since it is now trading for about $9, congratulations, you just made $200. Or you could sell it (to close) and take any profits now.

Good luck.