Just as for forward and futures contracts, the holder of an option is not entitled to earn any yield on the underlying asset before the option is exercised and the underlying asset is owned directly. The yield on a directly owned asset is called the convenience yield. On the other hand, the option holder does not need to bear the cost that is related to the storage or maintenance of the underlying asset, called cost-of-carry. A large yield such as a big dividend payment can make it worthwhile to exercise an option early. Suppose a stock pays a dividend of 5% tomorrow and an investor holds a deep in-the-money call option (i.e. the option is highly likely to be exercised) that matures next week. If the investor could exercise the option today, he or she would need to put down the strike price today but would capture the dividend. If he or she were to wait until maturity, there would only be a need to pay the strike price in a week but the dividend payment would be missed. Clearly, the possibility of an early exercise can be valuable if the underlying asset provides a yield. In that case, an American-style option is worth more than a European-style option.

The net yield can be directly observed in the market (announced dividend payments) or estimated from related markets.