What Is the Concept of ‘Opportunity Cost’ in the Context of Early Exercise?

Opportunity cost in early exercise is the value that is forfeited by choosing to exercise the option now instead of holding it. For an American call, the opportunity cost is the remaining time value that is lost.

For a put, it is the potential for the underlying asset to fall even further, yielding a greater profit, offset by the interest that could have been earned on the exercise proceeds.