Fugit
1. The amount of time that an investor believes is left until it would no longer be beneficial to exercise an option early.
2. The likelihood that an American-style option will be used before it expires. Investopedia Says:
The concept was named and created by Mark Garman, a Berkeley professor, who studied the optimal time for exercising an American option using binomial trees.
Unless an option is deep in-the-money, it should not be exercised early because this causes a loss of inherent value. Some investors find it profitable to exercise call options early when they are in-the-money or right before an ex-dividend date. Related Terms:
American Option
Call Option
Deep In The Money
Early Exercise
Ex-Dividend
Exercise
In The Money |