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**kvitacencia** · 05-06-2010, 05:37 AM

If we are talking options in common stock , there may be many opportunities where a real investor might exercise early based on an assessment of the company, industry trends or even recent events. The American option holder may have the chance to exerercie and sell a stock for gain while the European option holder finds no value in the exercise as the stock goes back down prior to expiry.

In fact your assessment that you never exercise an option before expiry day would be true only for stable or rising stocks (if you have a purchase option)

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This post is utterly ridiculous. I suggest you read a basic financial math book. Real investors, if they wish to take a market view, will resell the option for >= the intrinsic value in the market (strictly greater if implied volatility is anything other than 0). If the price was ever less than the intrinsic value then there exists a simple arbitrage. Exercising early is always suboptimal, modulo transaction costs and some minor difficulties like shorting at a retail level.

05-06-2010, 05:37 AM	#12
kvitacencia Join Date Oct 2005 Posts 432 Senior Member	If we are talking options in common stock , there may be many opportunities where a real investor might exercise early based on an assessment of the company, industry trends or even recent events. The American option holder may have the chance to exerercie and sell a stock for gain while the European option holder finds no value in the exercise as the stock goes back down prior to expiry. In fact your assessment that you never exercise an option before expiry day would be true only for stable or rising stocks (if you have a purchase option) / This post is utterly ridiculous. I suggest you read a basic financial math book. Real investors, if they wish to take a market view, will resell the option for >= the intrinsic value in the market (strictly greater if implied volatility is anything other than 0). If the price was ever less than the intrinsic value then there exists a simple arbitrage. Exercising early is always suboptimal, modulo transaction costs and some minor difficulties like shorting at a retail level.
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