Question
You bought an American put option some time ago. Today it has one year left to expiration. Interest rate is 10% per year. Annual compounding
You bought an American put option some time ago. Today it has one year left to expiration. Interest rate is 10% per year. Annual compounding applies. Strike price is $100, and stock price is $5. Which of the following is incorrect?
a. | You need to know the option premium to decide whether to exercise it now or to wait | |
b. | It is better to exercise the put now than wait until expiration
| |
c. | If you wait until expiration day to exercise the put option, the maximum amount it can possibly be worth at that time is 100
| |
d. | If you exercise the option now, it is worth 95
|
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