An American call should be exercised early when the stock price is extremely high and is expected to fall.

Question

Quizplus · Accepted Answer

An American call option can be exercised at any time before its expiry date. However, it is generally not advisable to exercise the call option early when the stock price is high and expected to fall, as the option holder would lose out on potential future gains if the stock price were to increase further. It is more advantageous to wait until closer to the expiry date to exercise the call, allowing the option holder to potentially benefit from more stock price appreciation.

An American Call Should Be Exercised Early When the Stock