2016-FRR Exam Dumps | The exercise for an American type option prior to expiration day is virtually certain in the following

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Question 20

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Question 20/145

The exercise for an American type option prior to expiration day is virtually certain in the following case:

A. In the event of a high dividend for an in-the-money call option

B. In the event of a high dividend for an in-the-money put option

C. In the event of a low dividend for an in-the-money call option

D. In the event of a low dividend for an in-the-money put option

Correct Answer: A

For American options, exercising an in-the-money call option before the ex-dividend date can be beneficial if the option is deep in the money and the dividend is significant. This is because the holder would receive the dividend payment, which can make early exercise profitable.

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