An options trading strategy that is used to buy puts or calls with a strike price that is lower than the current market price. This strategy is used when the trader believes that the price of the underlying asset will move lower in the future. Do you need cash to exercise options? If you are trading options, you will need to have cash or marginable securities in your account to cover the initial margin requirements as well as any exercise costs.

If you are buying options, you will need to have enough cash in your account to cover the premium plus any applicable commissions.

If you are selling options, you will need to have enough cash in your account to cover the premium plus any applicable commissions, and also to cover any potential losses if the option is exercised against you.

Generally speaking, you will need to have cash or marginable securities available in your account to cover any potential losses that could occur as a result of your options trades.

### What happens when you exercise an option?

When you exercise an option, you are essentially buying or selling the underlying security at the strike price. If you exercise a call option, you are buying the underlying security at the strike price. If you exercise a put option, you are selling the underlying security at the strike price.

##### How does exercise price affect option value?

The strike price is the price at which the holder of the option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset. The option premium is the price of the option contract. The option price is the sum of the option premium and the strike price.

The option price is affected by the strike price in two ways. First, the strike price determines the maximum profit or loss that can be made on the option. Second, the strike price affects the time value of the option.

The maximum profit or loss on a call option is the difference between the strike price and the underlying asset price at expiration, minus the option premium. For example, if the underlying asset is trading at $50 and the option has a strike price of $45, the maximum profit that can be made is $5 (the difference between the strike price and the asset price) minus the option premium. If the underlying asset is trading at $40, the maximum loss is the option premium.

The maximum profit or loss on a put option is the difference between the strike price and the underlying asset price at expiration, minus the option premium. For example, if the underlying asset is trading at $50 and the option has a strike price of $55, the maximum profit that can be made is $5 (the difference between the strike price and the asset price) minus the option premium. If the underlying asset is trading at $60, the maximum loss is the option premium.

The time value of an option is the amount by which the option premium exceeds the intrinsic value. The intrinsic value is the difference between the underlying asset price and the strike price, in the case of a call option, or the difference between the strike price and the underlying asset price, in the case of a put option.

The option premium is the sum of the intrinsic value and the time value. The intrinsic value is determined What if exercise price is higher than market price? If the exercise price is higher than the market price, then it is not possible to exercise the option and the option will expire worthless. Is it better to exercise an option or sell it? It depends on your goals. If you are looking to make a quick profit, then selling the option is probably the best option. However, if you are looking to hold onto the option for a longer period of time, then exercising it may be the better choice.