Question

In the following, suppose that neither stock pays a dividend.
a. Suppose you have a call option that permits you to receive one share of Apple by giving up one share of AOL. In what circumstance might you earlyexercise this call?
b. Suppose you have a put option that permits you to give up one share of Apple, receiving one share of AOL. In what circumstance might you early-exercise this put? Would there be a loss from not early-exercising if Apple had a zero stock price?
c. Now suppose that Apple is expected to pay a dividend. Which of the above answers will change? Why?


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  • CreatedAugust 12, 2015
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