Describe the Conditions When It Would Be Optimal to Exercise

question 9

Essay

Describe the conditions when it would be optimal to exercise an American Call and an American Put option prior to their expiration.

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Definitions:

Foot-In-The-Door Effect

A psychological phenomenon where agreeing to a small initial request increases the likelihood of agreeing to a larger request later.

Door-In-The-Face Technique

A persuasion strategy whereby a larger, less achievable request is made first, followed by a smaller, more reasonable request.

Foot-In-The-Door Effect

A psychological principle that suggests agreeing to a small request increases the likelihood of agreeing to a larger request later.

Compliance

The act of conforming to or following rules, standards, or laws, or yielding to a request or command from an authority.