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YouTube T3-36: Is it optimal to early exercise an option?

Nicole Seaman

Director of FRM Operations
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It is never optimal to early exercise a call option on a non-dividend-paying stock but it may be advisable to early exercise a call on a dividend-paying stock. For a put option, it is maybe optimal to early exercise a put on EITHER a dividend- or non-dividend-paying stock. The primary trade-off is between the strike price (which is either, in the case of the call, cash paid such that we'd prefer to pay it later; or in the case of the put, cash received such that we'd prefer to receive it now, ceteris paribus.

David's XLS is here: https://trtl.bz/2CwZS6J

 
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