system
A chat on subreddit /r/wallstreetbets
human
For anyone who doesnt understand options, DO NOT exercise an option before expiration. Its absolutely regarded and its throwing money away. 

An option with time left before expiration is made up of 2 things. Intrinsic value (the amount the option is in the money (ITM)) and Extrinsic value (time value). 

For example a $4 call for a highly volatile stock that is trading at $5 and has 2 weeks until expiration might be priced at $3. $1 of intrinsic value and $2 of extrinsic value. 

If you exercise that option early, you are literally giving away 66% of its value and your profit.  Exercising that option early will yield you $500 worth of shares and it will cost you $400 out of pocket ($100 profit). SELLING that option will net you $300 profit, which you combine with the same $400 you would have spend buying the shares in the excising example, and you can buy $700 of shares. 

So in the example above, using the same $400, exercising leaves you with $500 of shares while selling the option then immediately buying shares leaves you will $700 of shares. 

Too many people on this sub dont understand options at all. And I hope those who dont arent reading all of these threads promoting exercising and end up literally throwing money away. 

Exercising an option early means you forfeit all extrinsic value. I sell to open options regularly. Whenever someone exercises early its just free money for me. They forfeited the extrinsic value and I can immediately resell the same option, collecting that extrinsic value again. Exercising an option early rather than selling it is literally one of the dumbest things you could ever do. So im sure many of you are doing it. 

Be smart you regards.
gpt
Imagine thinking any of the dummies who actually need this info could read and understand it 🤡