Under certain circumstances (see beneath) early exercise may be advantageous to the choice holder. 1. An choice should only be exercised whether it is in the cash by not less than as a lot because the fees related to the underlying transaction (e.g. the payment for subsequently promoting an underlying which has been bodily delivered). Normally, equity call options should solely be exercised early on the day earlier than an ex-dividend date, after which only for deep in-the-cash options. 4. For an American-type put choice, early exercise is a risk for deep in-the-money choices. When exercising a name possibility, the owner of the option purchases the underlying shares (or commodities, fixed curiosity securities, and so on.) at the strike worth from the choice seller, whereas for a put possibility, the owner of the option sells the underlying to the choice seller, once more on the strike worth. 3. For an American-type call possibility, early exercise is a chance each time the advantages of being long the underlier outweigh the price of surrendering the option early.
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