Asked by Megan Carlson on Jun 05, 2024
Verified
An American call option can be exercised
A) any time on or before the expiration date.
B) only on the expiration date.
C) any time in the indefinite future.
D) only after dividends are paid.
E) None of the options are correct.
American Call Option
A type of options contract that allows the holder to buy the underlying asset at a specified price at any time before the expiration date.
Expiration Date
The date on which a derivative contract (like options or futures) becomes invalid and the right to exercise it ceases.
Indefinite Future
A time period in the future that has no defined ending or timeframe, often used in discussions about long-term possibilities or uncertainties.
- Apprehend the essence of European and American options along with the guidelines for their exercise.
Verified Answer
PL
Paulina LeyvaJun 12, 2024
Final Answer :
A
Explanation :
An American call option gives the holder the right, but not the obligation, to buy the underlying asset at a specified price on or before the expiration date. This flexibility to exercise the option at any point up until expiration is what distinguishes American options from European options, which can only be exercised on the expiration date.
Learning Objectives
- Apprehend the essence of European and American options along with the guidelines for their exercise.