I am currently researching options with the intent of begginning trading in a couple of months and had a few questions.
1. I understand that if you exercise a call you can place a sell order for the underlying securities at the same time and simply collect the difference between the strike price and the value of the security without ever physically holding the stock. Is it possible to do the same thing with a put option? I.e. Exercise the option and purchase the underlying security at the same time.
2. If it is possible to do this with a put, do you need the capital in your account to purchase these shares or does your broker recognise what you are doing and allow you to do this without the capital?
Likewise, if exercising a call and selling the shares immediately do you need to have the capital in your account to purchase the shares at the strike price?
The broker I will be using is Interactive Brokers if that helps.
The reason I ask this is because I was wondering what would happen if you have an In the money put/call and are unable to trade it and don't have the equity in your account to exercise the option. Is what I have suggested above possible such that it does not expire worthless.
Thanks for the help.