The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer the question, “Can you generate an instant profit buying in the money call options?” Many new traders and many experienced traders as well wrongly assume that you can generate an instant profit buying in the money call options. The reason that they assume this is they attribute most of the value to these call options as just the difference between the strike price or the in the money strike price and the market price of the stock and they think that you could buy the call option and resell the call option back to the market for a quick profit or buy the call option, exercise your call option which would purchase stock at the strike price and then resell the stock back to the market at the current underlying stock price conceivably much higher than where you bought the in money call option. But in either of these cases, what they fail to recognize is the premium and the extrinsic value of th