Explain in Simple Terms Why a Call Option on a Non-Dividend

question 14

Essay

Explain in simple terms why a call option on a non-dividend paying stock should never be exercised early.

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Definitions:

FICA Tax Rate

The combined rate for Social Security and Medicare taxes in the United States, paid by both employees and employers.

Payroll Deduction

Amounts withheld from an employee's salary by an employer for taxes, benefits, and other legally permitted or voluntary deductions.

Regular Hourly Wage

This is the standard amount of money paid to an employee for each hour of work, excluding overtime rates or bonuses.

Net Pay

The amount of an employee's earnings after all deductions, such as taxes and retirement contributions, have been withheld.