A deep in-the-money call option on futures is exercised early because
A)the intrinsic value is maximized
B)it behaves like a futures but ties up funds
C)the futures price is not likely to rise any further
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

A deep in-the-money call option on futures might be exercised early because it behaves like a futures contract but ties up additional funds that could be used elsewhere. This is because the option has a significant intrinsic value and closely tracks the price movements of the underlying futures contract, making it similar to holding the futures directly but with capital tied up in the option premium.

A Deep In-The-Money Call Option on Futures Is Exercised Early