Fugit

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DEFINITION of 'Fugit'

The amount of time that an investor believes is left until it would no longer be beneficial to exercise an option early, or the likelihood that an American-style option will be used before it expires. The fugit concept was named and created by Mark Garman, a Berkeley professor who studied the optimal time for exercising an American option using binomial trees.

INVESTOPEDIA EXPLAINS 'Fugit'

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
  1. Deep In The Money

    An option with an exercise price, or strike price, significantly ...
  2. Early Exercise

    The exercise of an option prior to its expiration date. Early ...
  3. American Option

    An option that can be exercised anytime during its life. American ...
  4. Exercise

    To put into effect the right specified in a contract. In options ...
  5. In The Money

    1. For a call option, when the option's strike price is below ...
  6. Ex-Dividend

    A classification of trading shares when a declared dividend belongs ...
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