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Answer: It can be optimal to exercise an American-style put option on a non-dividend-paying stock early.
It is never optimal to exercise an American call option on a non-dividend-paying stock before the expiration date, but at any given time during its life, a put option could be exercised early if it is sufficiently deep in the money. Thus, it can be optimal to exercise an American put option on a non-dividend-paying stock early.
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Which of the following statements is correct about the early exercise of American-style options?
A
It is always optimal to exercise an American-style call option on a non-dividend-paying stock before the expiration date.
B
It can be optimal to exercise an American-style put option on a non-dividend-paying stock early.
C
It can be optimal to exercise an American-style call option on a non-dividend-paying stock early.
D
It is never optimal to exercise an American-style put option on a non-dividend-paying stock before the expiration date.
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