Why is early exercise of call option of non dividend paying stocks not valuable? Schweser did not explain the rationale.
Say it’s a two year option and the price went up after a year (so it’s in the money) and I think the price in year 2 will decrease… would it not be advantageous to exercise it early?
No, you wouldn’t exercise it because it’d be more profitable if you just sold the call option back to the market. Any time before expiration, the option is worth its extrinsic (time value) and intrinsic value (degree to which it is in the money), which will be greater than exercising it and only capturing the intrinsic value. Does that make sense?