Call Option Rejection Example
Option
to buy or call option will not be exercised in the market price at exercise
date is lower than exercise, because you can simply buy the commodity or
financial in the market at lower price, and your loss is equal to the option
price only.
Call option Rejection Example
Pound
call option of Euro = 2000
Strike
price $/Pound = 2.7
Market
price at Strike Date = 2.3
Solution
Call
Option 2000 x 2.7 = $ 5400
Market
Price Cost 2000 x 2.3 = $ 4600
Market
price will cost you $ 400 lower than call option, therefore call option is
allowed to be lapsed.
