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.
b) do nothing because he cannot make a profit.
• c) do nothing because he is short the call.
  No. Victor is long the call and can therefore exercise it, if he wants.

(Click here for help)