Failure to Exercise Call Options: An Anomaly and a Trading Game

@inproceedings{Pool2008FailureTE,
  title={Failure to Exercise Call Options: An Anomaly and a Trading Game},
  author={Veronika Krepely Pool and Hans Rudolf Stoll and Robert E. Whaley},
  year={2008}
}
In the U.S., exchange-traded options are unprotected from cash dividend payments on the underlying stock. Consequently, it may become optimal to exercise deep in-the-money call options just prior to the ex-dividend day. In this study, we examine the extent to which option holders fail to exercise their call options on the day prior to an ex-dividend day when it is optimal to do so. Using a sample of call options on stocks with quarterly dividends of at least a penny per share during the period… CONTINUE READING

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