o7Media, question for you. Are you only allowed to exercise your contract during the $5,$10, $25 intervals? So if it doesn't rally to at least $5 a share, my contract is useless? I heard that somewhere. Also, how many contracts can I purchase at any given time. Is there a limited amount available? Also, when I sell back my call option, do they just drop the money back in my trade account, or do I have to wait for someone to buy my contract back or something? I understand the fundamentals of options and i'm studying up on them every day, i'm just nearing that point where I'm going to actually buy a contract and want to be ready.
You can only exercise a contract if it's ITM (in the money). But you normally don't want to exercise them because it's almost always the wrong way to go. Very rarely are options exercised, only about 10% of all options traded are. You want to sell them back into the market.
If your calls/puts are not ITM by expiration then yes they'll be worthless. But options have a time value, they don't have to be ITM to profit.
There's no limit to how many you can buy as long as you have the funds.
You have to sell your contracts to someone else, so yes in a way you have to wait for someone to buy it. But usually there aren't any liquidity issues. For options cash takes one day to settle so you'll be able to use those funds again the next day. But your balance will update instantly.