Do You Exercise Options Before Expiration?

No — I almost never exercise. To take profit on a call I bought, I just sell the option contract itself (a sell-to-close order), the same way you'd sell a stock you own. The broker pays me the difference between what I paid and what the contract is worth now, and I never touch the 100 shares.

Here's why it matters. An option's price is made of two parts:

• Intrinsic value — how far in the money the option is.
• Time value — the extra premium you're paid for the time left until expiration.

If you exercise early, you only capture the intrinsic value and throw away the remaining time value — and you'd also need enough cash on hand to buy 100 shares. Selling the contract captures both the intrinsic and the time value in one shot, with no big capital outlay, so it's almost always the better deal.

The only place exercise and assignment really show up in how I trade is on the selling side — for example the Wheel, where a put I sold can get assigned and turn into shares. That's by design, not me choosing to exercise a long option.