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May
13
comment Exercising an American call option early
Great, thanks. The rationale I read only gave the reason that you'll lose interest on the cash you spend to exercise the call option.
May
13
comment Exercising an American call option early
Okay, so say that the stock is going to go down to $15, lower than the exercise price - the option will be worthless, I'll make a loss. But had I exercised when the stock price was higher than the exercise price (not necessarily highest) I'd have made a profit. Isn't that more optimal than the loss that has been made by holding onto the option until expiry?
May
13
comment Exercising an American call option early
But my example describes a profit that wouldn't be possible if the option was European, why isn't that a benefit?