Chapter 02 · Section 2.1

Exercising Options-2

Suppose Victor bought a PHLX July 45 DM call option and paid a premium of 3 cents. It is now July, at expiration. Deutsche Marks are trading at $.50/DM

Victor could reasonably:

• a) exercise the option.
  Yes. The call is in-the-money by 5 cents, so the option is profitable to exercise. Continue
  b) do nothing because he cannot make a profit.
  c) do nothing because he is short the call.

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