Advanced American Options: Optimal Exercise and Profit
Here is something that should make every options trader stop and think. The “optimal” time to exercise an American option depends on who you are. The textbook answer assumes the holder is delta hedging. But if the holder were delta hedging, why would they buy the option in the first place? Chapter 63 of Wilmott’s book, based on a 1998 paper with Dr. Hyungsok Ahn, digs into this question and reaches a conclusion that is great news for option writers.