Why Might an ITM American Option Not Be Exercised Immediately? ⎊ Path

Why Might an ITM American Option Not Be Exercised Immediately?

An In-The-Money (ITM) American option is often not exercised immediately because the option still holds time value. Exercising early sacrifices this time value.

It is usually more profitable to sell the option in the market for its premium (intrinsic + time value) rather than exercising and only capturing the intrinsic value.

Why Is “Early Exercise” of an American-Style Option Rarely Optimal for the Holder?

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Why Are American Call Options on Non-Dividend-Paying Stocks Rarely Exercised Early?

Why Is It Generally Not Optimal to Exercise an American Call Option Early?

Why Is Early Exercise Generally Not Optimal for an American Call Option on a Non-Dividend-Paying Asset?

Why Is Early Exercise of an American Call Option on Crypto Often Suboptimal?

Can an American-Style Call Option on a Non-Dividend-Paying Asset Be Optimally Exercised Early?

Glossar

Time Value

Component ⎊ Time value, also known as extrinsic value, is a component of an option's premium that reflects the probability of the underlying asset's price moving favorably before the option expires.