Assume all stocks are non-dividend paying. Given this assumption, which one of these statements is correct regarding stock options?
A) European put options are more valuable than comparable American put options.
B) Exercising a well-into-the-money American put option is generally not a good idea.
C) It is never optimal to exercise an American call option early.
D) You should wait to exercise a put option if the stock price falls to zero.
E) You are better off exercising an in-the-money call option than selling it.

Question

Quizplus · Accepted Answer

C) It is never optimal to exercise an American call option early on a non-dividend-paying stock because the option could still gain in value from potential increases in the stock price. Exercising early forfeits this potential gain, making it less advantageous than holding the option.

Assume All Stocks Are Non-Dividend Paying