How to Exercise Stock Options

Video Transcript

"Hello, I'm Roger Groh with Groh Asset Management. Did you ever buy a stock option and think that you've made money in that stock option and wondered what to do next? Well today we're going to talk a little bit about how you actually exercise a stock option. In the old days when you owned an option that became profitable as the underlying stock moved up or down to meet the price parameter setup in your option, you would then call or write the broker dealer that held that option for you. All of that took quite a while in the old days. Maybe it was the weekend, maybe the broker was on vacation, maybe the broker was out to lunch, maybe, there were a lot of maybes. And the problem is that at one point the price of the stock may have been high enough to exercise that option but by the time you went through that whole process, it's quite possible that the price of the stock moved back down where it was no longer profitable for you. So you missed out. I know a person that was in that situation where he was counting his retirement on simply selling stocks that he owned via the profit through stock options the next day. The stock that in question opened down significantly, he never had his chance to do that and it took 10 more years of work for that person to get back to where they had been. So this is a risky business. Now you don't have to go through that convoluted process. Many of the stock options are online and if you're a trader then I suggest that online you enter the instructions where if it hits a price point where it's profitable and you want to get out, it's done automatically. Where you don't have to then call and go through that whole process. Some brokers will do that for you, some will not. Be sure that you pick a broker to hold your stock options where you can setup ahead of time instructions on what to do. It's very important, it's the easiest way to increase your chances of making money and that's a little bit about how to exercise stock options. I'm Roger Groh, thank you for spending a few minutes with me."