Chapter 02 · Section 2.1

Exercising Options-1

Now let us consider when it is profitable to exercise an option: Suppose you are the holder of a PHLX DM call option.

You will most likely decide to exercise when the option is:

a) out-of-the-money.
b) at-the-money.
• c) in-the-money.
  Yes. You are right. When a call option is in-the-money, the price of the underlying asset is higher than the exercise price. You can profit by buying at the exercise price and selling on the spot market at a higher price. Continue
  d) None of the above affect the decision to exercise.

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