No. of Recommendations: 1
the option holder sends you $42,500 (per option), and you then proceed to buy 100 shares for $42,836 and deliver them to the option holder. Total additional cash expended is $336.
What is the order of things happening?
Are you sure that you get the $42,500 first?
I would think that the exchange of money for stock is simultaneous, so you wouldn't have the cash available to buy the new stock shares first.
But maybe the broker gives you a few days to designate which shares you are delivering? I have read that Etrade lets you do that. But I wonder if they would let you say that you delivered a lot that you didn't own until a day or two after the call got exercised.
Of course, in a margin account you could buy the new lot beforehand.
