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Please help me to explain why exercise or not exercise put option/call option (collar) in simple way.
I already read the answer many times but I cannot understand the logic behind the conclusion and what is the rule.Thank you so such.
Have you worked through the page on collars in our free lecture notes, because I can’t really explain it in any more simple way?
We can only exercise the option that we have bought. As far as the option that we have sold (in order to create the collar) it is the purchaser of the option who decides whether or not to exercise it (and if they do exercise it that we have to pay out to them).
When I read again page on collar and present exercise price/ future price in SD20 question in % term, I can understand why exercise or not exercise the option. Can I present exercise price/ future price in this way in the exam ?
In the exam, is it required to explain the reason for exercise or not exercise the option same as the examiner did to gain full mark?
If I just prepare full calculation and make a conclusion exercise/not exercise, can I get full mark ?
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