Forgive me, I am new to options and am enjoying everything I'm learning. But, I think it goes without saying, I still have much to learn.
Are there ever scenarios where someone would buy a call option that is very close to expiring, then exercise the contract immediately (if the premium + strike price = lower than current stock price)? Or is it against some kind of regulation or rule?
Example from browsing through different stock's options (it's only been a few times, but its happened):
Date: 6/14
Stock: ABCD
Current price $6.20
Strike price: $5.00 Premium: $0.98 Break even: $-0.22 Exp: 6/15
Sorry if this is noob, but I'm just trying to get an idea of how/why this could happen. What is to stop someone with some extra capital from hunting for negative break even call options, exercising them immediately and dumping the 100 shares?
Submitted June 14, 2018 at 10:51AM by MP8877 https://ift.tt/2ybhxj6
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