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

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