Which option has the highest probability of being exercised early?
A) Non-dividend paying European option
B) Dividend paying European option
C) Non-dividend paying American option
D) Dividend paying American option

Question

Quizplus · Accepted Answer

Dividend paying American options have the highest probability of being exercised early because the holder may want to capture the dividend payment by exercising the option before the stock goes ex-dividend.

Which Option Has the Highest Probability of Being Exercised Early