It is May 19th and you own a June, European call on ABC Corp.with an exercise price of $50.The option trades at $40 and ABC is trading at $86.What should you do?
A)Exercise the option now and take the profits.
B)Buy more options on ABC Corp.
C)Sell your ABC stock before its price declines.
D)Sit and wait until the June expiration.

Question

Quizplus · Accepted Answer

Since it's a European option, it can only be exercised at expiration, not before. Therefore, the only option is to wait until the June expiration to make a decision.

It Is May 19th and You Own a June, European