price of exercise

[croker]

If I sell a CALL at a strike of $46 for a premium of $1 at what price would the option be typically exercised, $46 or $47?

 

[Martinghoul]

There is no "typically" about it. The option either expires worthless or gets exercised at the strike price, always. The premium you paid or recvd is completely irrelevant to what happens at expiry.

 

[croker]

yea that's what i was thinking, but i sold a CALL on BP ADR for $46 a couple of weeks ago and BP went over $46 yesterday but the option wasn't exercised as I thought it would be.

 

[Martinghoul]

yea that's what i was thinking, but i sold a CALL on BP ADR for $46 a couple of weeks ago and BP went over $46 yesterday but the option wasn't exercised as I thought it would be.

Why would you expect the option to be exercised? That's not how options work... Even for an American option (i.e. an option where you can exercise at any time before expiry), it very rarely makes sense to exercise early. So wait for expiry and see what happens then.