Chapter 21, Problem 23PS

American options Other things equal, which of these American options are you most likely to want to exercise early?

1. a. A put option on a stock with a large dividend or a call on the same stock.
2. b. A put option on a stock that is selling below exercise price or a call on the same stock.
3. c. A put option when the interest rate is high or the same put option when the interest rate is low.

Illustrate your answer with examples.