An options investor made this remark: "The underlying stock of my call option has reached its highest price ever. It has appreciated over 100% in the last 6 months. I should exercise my call now. Unlike a stock, the call option has limited life. Should the stock price fall due to a technical correction, the 2 months left before the call expires is too short to see a rebound in the price. If I were to hold the stock instead, I would definitely not sell now.”

Question

1. Appraise the merit of the remark:

2. Assuming the stock does not pay a dividend.

3. Assuming the stock pays a dividend.

Answer rating: 100% (QA)

Answer An options investor made this remark The underlying stock of my call option has reached its highest price ever It has appreciated over 100 in t... View the full answer