You buy a long call for a strike of 10 dollars expiring in 30 days. lets say it jumps to 15 dollars with 5 days left. no money to actually exercise the option even though I would make 500 minus the premium I paid. how can I make a profit still on the performance? When you sell to close, are you then responsible for delivering the 100 shares at the end as you would a put contract ? or are you making the premium, which is basically profit from the performance of the stock option from when you bought it. obviously can't afford to deliver a put.
STC is entirely different from exercising the contract. You enter BTO, you close STC and realize the difference depending on the premium you paid that determines your profit margin. Thats a general answer.
So I would make the increased premium due to stock price increase and it being so far itm now? Iwouldn't be responsible for delivering the contract to the buyer in my stc? Is this how average Joe traders make money if they can't afford the thousands of dollars to exercise the option?
To answer your first question. Yes sir. Second question. You are closing the contract and collecting the premium. Nothing is being delivered, simply being closed. Third, I would study options and how they work. I write contracts STO and the majority of the time they expire worthless for the buyer and I keep the premium. Sometimes they run farther than I anticipate but rarely. In that case I can BTC or simply let them get exercised. #3 is the most important one.
