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Under certain circumstances (see below) early exercise could also be advantageous to the option holder. 1. An option should solely be exercised if it is in the cash by at least as much as the fees associated with the underlying transaction (e.g. the price for subsequently promoting an underlying which has been bodily delivered). On the whole, fairness call options should only be exercised early on the day earlier than an ex-dividend date, after which only for deep in-the-money choices. 4. For an American-fashion put possibility, early exercise is a risk for deep in-the-money choices. When exercising a name choice, the owner of the option purchases the underlying shares (or commodities, fastened interest securities, etc.) at the strike worth from the option seller, whereas for a put option, the owner of the choice sells the underlying to the option seller, once more on the strike worth. 3. For an American-model call choice, early exercise is a chance whenever the benefits of being lengthy the underlier outweigh the price of surrendering the choice early.
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