You Bought an American put option a year back for $6. The time-to-maturity was 1 year, stock was trading at $55, and you chose to buy an out-of-the-money option with exercise price =$50. 9 months has passed since you bought the option, so time remaining to maturity Assume discreetly compounded risk free rate over next 3 months =1% (not annualized) (continuous compounded rate =0.99503%). Will you exercise the option today or will you wait till maturity when you expect the stock price to be zero?

Answer rating: 100% (QA)

To determine whether you should exercise the American put option today or wait until maturity we need to compare the current value of the option to it... View the full answer