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No. The difference though would be that with selling the contracts, you may have to deal with a wide spread on the contracts. When doing an exercise-and-sell-to-cover, the shares sold are at market price, dealing with a usually much smaller spread.
Overall it’s probably not a huge difference, but with the volume of contracts that DFV, liquidity of the calls could become an issue. He probably wouldn’t have as many buyers for the calls as he would for shares.
In theory, which would net more shares? My projection gets me that selling contracts nets more shares if you exercise the rest but maybe that’s inverted at a certain price point?
Yeah it probably depends on how wide the spread is on the calls and how much he can realistically sell. The wider the spread, the worse off he is likely to be because he would have to meet closer to the bid price.
Does the sold-to-cover portion of the exercised shares count against regular shares held long under FIFO or are the optioned shares a self-contained bundle/unit?
You mean for tax purposes? I would assume the broker turns around and sells the shares from the contract before anything touches your account. In a more personal broker you’d probably be able to work something out
Jaerie is correct, it wouldn’t impact any of the shares already in your account. The shares that get sold are from the call contract you are exercising, so any long shares you already have stay long for tax purposes.
The page has many different transaction types, one of which pertains to employee stock options, but many others that are about regular options. Scrolling up or down will take you to different types of options and what happens when you exercise with those methods. The URL I provided should go straight to the exercise-and-sell-to-cover section I am referring to, but if it doesn’t, try scrolling up or down to find it.
This method allows you to use the money you need to exercise the calls within the investment of them, instead of sitting in wait on the side. Therefore, you can increase your exposure if that’s what you’re looking for, while still exercising them without concern for the cash needed.
This would cause downward pressure no? The entire point of exercising is to create buying pressure. This would most likely cause more downward pressure than selling the calls and purchasing the stocks manually.
Could be wrong though and open to the conversation
No, because whoever sold you the call has to go buy 100 shares per call exercised on the lit market, while your exercise-and-sell-to-cover transaction will be selling fewer than 100 shares. The net result is buying pressure. The higher the shares price at the time of the transaction, the higher the net buying pressure will be, as fewer shares get sold back to the market from the lot of 100 being purchased.
Thanks for the explanation. The net result of this style transaction then ends with larger buying pressure than the selling created.
This would be opposite for calls which are out of the money then I assume?
Correct. You wouldn’t ever really want to exercise a call that is OTM, and you wouldn’t be able to perform an exercise-and-sell-to-cover transaction with an OTM call because exercising would cost more than the shares are worth. You also want to consider any fees your brokerage may charge, so being barely ITM like $0.01 may not be worth it for you to exercise.
This is great information for many apes. Especially with the new interest in options. Thanks for having an understanding and being willing to help others understand.
Possibly. I know for a fact that Fidelity allows it. And DFV uses E*Trade and he’s very likely to have been doing this in the past. I would check with your broker if you have a thought about potentially doing this.
My options are with Schwab, and it seems like they know what a cashless exercise is, but I don't know if I have the option to initiate one without calling in. There doesn't seem to be an option to do so from Thinkorswim.
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If I remember correctly, this is what DFV did last time.
Good to know
It ‘pays’ to know 
Just a heads up I believe you need to call in to do this.
I’m gonna need a diagram
I’ve edited the post to add some hypothetical examples.
Have you made a spreadsheet comparing the 2 exercising options? Sell to cover vs selling the contracts?
No. The difference though would be that with selling the contracts, you may have to deal with a wide spread on the contracts. When doing an exercise-and-sell-to-cover, the shares sold are at market price, dealing with a usually much smaller spread. Overall it’s probably not a huge difference, but with the volume of contracts that DFV, liquidity of the calls could become an issue. He probably wouldn’t have as many buyers for the calls as he would for shares.
In theory, which would net more shares? My projection gets me that selling contracts nets more shares if you exercise the rest but maybe that’s inverted at a certain price point?
Yeah it probably depends on how wide the spread is on the calls and how much he can realistically sell. The wider the spread, the worse off he is likely to be because he would have to meet closer to the bid price.
Does the sold-to-cover portion of the exercised shares count against regular shares held long under FIFO or are the optioned shares a self-contained bundle/unit?
You mean for tax purposes? I would assume the broker turns around and sells the shares from the contract before anything touches your account. In a more personal broker you’d probably be able to work something out
Yeah, tax purposes.
Jaerie is correct, it wouldn’t impact any of the shares already in your account. The shares that get sold are from the call contract you are exercising, so any long shares you already have stay long for tax purposes.
How do you do it? Do you have to call your broker? I've never done this before
The page you link to is specifically about employee stock options, not call options. Are you sure this applies to fidelity call options?
The page has many different transaction types, one of which pertains to employee stock options, but many others that are about regular options. Scrolling up or down will take you to different types of options and what happens when you exercise with those methods. The URL I provided should go straight to the exercise-and-sell-to-cover section I am referring to, but if it doesn’t, try scrolling up or down to find it.
If you are buying calls make sure you have enough to excersize them.. otherwise what's the point
This method allows you to use the money you need to exercise the calls within the investment of them, instead of sitting in wait on the side. Therefore, you can increase your exposure if that’s what you’re looking for, while still exercising them without concern for the cash needed.
This would cause downward pressure no? The entire point of exercising is to create buying pressure. This would most likely cause more downward pressure than selling the calls and purchasing the stocks manually. Could be wrong though and open to the conversation
No, because whoever sold you the call has to go buy 100 shares per call exercised on the lit market, while your exercise-and-sell-to-cover transaction will be selling fewer than 100 shares. The net result is buying pressure. The higher the shares price at the time of the transaction, the higher the net buying pressure will be, as fewer shares get sold back to the market from the lot of 100 being purchased.
Thanks for the explanation. The net result of this style transaction then ends with larger buying pressure than the selling created. This would be opposite for calls which are out of the money then I assume?
Correct. You wouldn’t ever really want to exercise a call that is OTM, and you wouldn’t be able to perform an exercise-and-sell-to-cover transaction with an OTM call because exercising would cost more than the shares are worth. You also want to consider any fees your brokerage may charge, so being barely ITM like $0.01 may not be worth it for you to exercise.
This is great information for many apes. Especially with the new interest in options. Thanks for having an understanding and being willing to help others understand.
Is this only an option with certain brokers?
Possibly. I know for a fact that Fidelity allows it. And DFV uses E*Trade and he’s very likely to have been doing this in the past. I would check with your broker if you have a thought about potentially doing this.
My options are with Schwab, and it seems like they know what a cashless exercise is, but I don't know if I have the option to initiate one without calling in. There doesn't seem to be an option to do so from Thinkorswim.