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I've said in the past that traders rarely exercise options because they lose the extrinsic value in the option when doing so.

While exercising an option is generally a bad idea and leads to unnecessary losses, there are specific scenarios where exercising an option can be a wise trading decision.

In this video, I'll walk you through five specific scenarios where exercising an option can be advantageous:

0:00 Intro
0:10 Illiquid Options
0:40 OTM to ITM at Expiration
1:53 Defer Taxation
3:08 The Clean Unwind
3:52 The Dividend Capture

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Disclaimer: Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction, or investment. Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past performance is not necessarily indicative of future results. I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make.

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