Is It Ever Rational to Exercise an American Call Option Early If the Option Is Out-of-the-Money?
No, it is never rational to exercise an American call option that is out-of-the-money (OTM). An OTM option has zero intrinsic value.
Exercising it would require the holder to buy the underlying asset at the strike price, which is higher than the current market price, resulting in an immediate loss. The option should simply be allowed to expire worthless.
