InvestorQ : Once I buy an option, how do I realize the profit when the price of the stock goes up? Do I need to go to the exchange and exercise it?
F&O
Rutuja Nigam made post

Once I buy an option, how do I realize the profit when the price of the stock goes up? Do I need to go to the exchange and exercise it?

Answer
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Arti Chavan answered.
2 years ago


The question of daily exercise of options arises only in case of American options. In India, all index and stock options are in the nature of European Options. That means they can only be exercised on the day of expiry which is the last Thursday of the month. However, that does not mean that you don’t have an exit option. In fact, the most popular and smart exit option is the squaring of your positions in the options market. With rising liquidity in options that is hardly a challenge. So it means that you are not stuck in your call options position for the full month? Not at all! You can sell your call option in the F&O market just like you sell shares. Let us explain! If you bought Tata Steel 650 call option at Rs.10 and if the stock price moved up from Rs.640 to 660 in 2 days, the call option value will also go up to say Rs.18. So you can sell the call option in the market and book profit of Rs.8 (18-10). You need to check for liquidity of options. But in case of most of the large and reputed names, that is hardly an issue.