AdvancedMultiple choice
Rates are high and a stock on which you hold an American put has collapsed to near zero. Why might you exercise before expiry?
- ABecause an American put must always be exercised the moment it is in the money
- BTo receive the strike now and earn interest on it
- CBecause the put’s delta becomes positive near zero and the position starts losing money
- DTo avoid the dividend that the stock will pay before expiry
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