2007-05-18 02:08:57 · 2 answers · asked by Magdielpr 1 in Business & Finance ➔ Investing
If this is a true physical/spot delivery option, then the answer is yes. If you are a physical user of copper, there may be a convenience yield (liken it to a equity dividend) of physically having copper today vs. having it at some point in the future. Example: You would have to shutdown a multi-million dollar factory.
2007-05-18 02:21:35 · answer #1 · answered by gls_merch 5 · 0⤊ 0⤋
I have a slight quibble with the reason that GLS gave. Generally you are better off selling the contract and buying in the spot market.
If the American Option is not liquid, you might want to exercise early if you want to take delivery of the copper early. If there are transaction costs or delivery cost savings involved with exercising early rather than selling and buying in the stock market -- then that is an additional reason to exercise early.
However, if it is a liquid market, you are probably better off selling the option and buying the copper in the spot market. The gain would be equal to the call price minus the intrinsic value.
2007-05-18 14:31:39 · answer #2 · answered by Ranto 7 · 0⤊ 0⤋