You hold an American call option with a 30 strike price on an equity that currently sells at 35. The option expires in one year. Compare the cash flows at expiration from:

(a) Exercising the option now and putting the resulting 5 into a bank account until the expiration date.

(b) Selling short the equity, placing the 35 you receive into a bank account, and holding the option until expiration.

Answer rating: 100% (QA)

Comparing Cash Flows Heres a comparison of the cash flows at expiration ... View the full answer