Which of the following statements best describes a feature of an American option? Early exercise of an American:
- put option is optimal only if the underlying is dividend paying.
- call option is never optimal if the underlying is dividend paying.
- put option that is deep in the money may be optimal
Answer is 3, but It could also be 1, right? exercise early, before they pay the dividend, because if they pay the dividend and you have the put option, the underlying asset will go down and the value of your option to.