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 Politics : Ask Michael Burke

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To: Tommaso who wrote (94344)2/3/2002 1:30:57 PM
From: Don LloydRead Replies (2) of 132041
 
Tommaso -

Not in this case.
The decay, in this case, works in my favor since I am paying less than the intrinsic value of the option. American-style options always cost more than the intrinsic value because of the time value. Anyone who buys and exercises and American-style option automatically loses the time premium. But exercise is impossible until expiration with the European-style option and this disadvantage has resulted in their selling at a discount to intrinsic value rather than a premium.

That's interesting. Are you saying that you can buy a leap $40 strike call on a $49 stock for less than $9? Or something else?

TIA, Don
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