comp_sci_kid

The original question asks why there is no benefit to early exercise on stocks with no dividends.

its vwry simple: the value of my call option will always be greater than just the intrinsic value component because of time value (which diminishes at an increasing rate as we approach expiration).

If we exercise, we just capturing the intrinsic value and we lose out on the time value component.

example: i own a call option with a strike at $10 and the underlying is $12. The value of my option is at LEAST $2 where if i exercise the value is EXACTLY $2 (aside from costs). Further, Ive tied up my capital by exercising.

As far as the put goes, the same logic applies only it also applies to stocks that pay dividends as well.