Which of the following is true when there are dividends
A) It is never optimal to exercise a call option on the stock early
B) It can be optimal to exercise a call option at any time
C) It is only ever optimal to exercise a call option immediately after an ex-dividend date
D) None of the above

Question

Quizplus · Accepted Answer

The optimal time to exercise a call option with dividends depends on various factors such as time to expiration, interest rates, and the dividend amount. It may be optimal to exercise the call option before the ex-dividend date to capture the dividend or after the ex-dividend date to avoid the dividend effect on the stock price. Therefore, the decision to exercise a call option with dividends is not always straightforward, and none of the given options represents the complete truth.

Which of the Following Is True When There Are Dividends