Question

what two conditions makes the early exercise valuable? (american options)

Answer 1

An early exercise makes sense under following conditions:-

1) Just before the dividend date, it makes sense to exercise the option and take delivery of the stock to get the dividend

2) In case interest rate is negative, then it does not make sense to delay payment of strike price to take advantage of time value of money. With interest rate being negative, there is no time value and paying strike price early through early exercise of option is valuable