Exercise is when a the owner of a call or Put Option asserts their right to buy or sell the Underlying asset or commodity. It is the opposite side of Assignment (which applies to Options sellers). The rules about when an option contract owner can exercise their rights depend on whether the option is American Style or European Style. The former allows Options to be exercised at any time, the latter only at Expiration. Options which are In The Money at Expiration are typically automatically exercised. American Style Options on stocks might get exercised early by the owner to take advantage of the payment of dividends on the Underlying.
Contributed by: Ralph Windsor
Related Directory Entries
External Links
Options Assignment FAQhttp://www.optionseducation.org/tools/faq/options_assignment.html
An FAQ prepared by the Options Industry Council about Options Assignment.
View OIC Options Glossary in Options Market Glossary Directory
Exercise and Assignment, Early or Otherwisehttps://www.thinkorswim.com/tos/displayPage.tos?webpage=lessonExercise
A ThinkOrSwim article explaining Options Assignment and Exercise.
View ThinkOrSwim in Options Market Glossary Directory
Options Quick Facts - Expiration, Exercise and Assignmenthttp://www.cboe.com/learncenter/concepts/beyond/expiration.aspx
CBOE article on Options Exercise and Assignment.
View CBOE Options Dictionary in Options Market Glossary Directory
What Is Early Exercise And Assignment?http://www.optionsplaybook.com/managing-positions/early-options-exercise/
Options Playbook article describing Assignment and Early Exercise.
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