An American put option on a stock that pays no dividends:
A) May be exercised early if the stock drops sharply before maturity.
B) Is always exercised early when the the put is deep in-the-money, and the volatility of the stock rises sharply from its initial level.
C) Is not exercised early unless the growth in the stock is lower than the rate of interest.
D) Is never exercised early.

Question

Quizplus · Accepted Answer

An American put option on a stock that pays no dividends may be exercised early if the stock drops sharply before maturity. This is because the holder of the put option can benefit from selling the stock at the strike price which may be significantly higher than the current market price.

An American Put Option on a Stock That Pays No