“In the money” options

Most holders of “in the money” options do not use them to buy the underlying stock, even on the option’s expiration date, but instead sell them to other investors. Why do you think this is so?

This is to save on commissions. Using an option to buy stock and then selling the stock to pocket the profit requires two transactions each with a brokerage commission. Selling the option to a broker, who can pool it with many other options and exercise them much more cheaply, requires the investor to pay only one commission. In addition, commissions for trading options are much less than commissions for buying and selling shares of stock resulting in a second savings.

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