Chapter 02 · Section 2.1

Exercising Options-4

Suppose Victor bought a PHLX July 45 DM put option and paid a premium of 3 cents. It is now July, at expiration. Deutsche Marks are trading at $.43/DM. Victor will probably:

• a) exercise the option.
  Yes. It is always profitable to exercise an option, put or call, if it is in-the-money. Even if the in-the-money amount does not cover the entire premium it will cover it partially. Continue
  b) do nothing because he cannot make a profit.
  c) do nothing because he is short the put.

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