What does it mean to exercise an option?

To exercise an option means to put into effect the right specified in the options contract. Advertisement. An options contract gives the buyer the right, but not the obligation, to buy or sell an underlying security at a specified price on or before an expiration date.

What is exercise in options trading?

What Is Exercise? Exercise means to put into effect the right to buy or sell the underlying financial instrument specified in an options contract. In options trading, the holder of an option has the right, but not the obligation, to buy or sell the option's underlying security at a specified price on or before a specified date in the future.

How do I exercise a put option?

To exercise an option, you simply advise your broker that you wish to exercise the option in your contract. If the holder of a put option exercises the contract, they will sell the underlying security at a stated price within a specific timeframe.

What are options & how do they work?

The basic premise of options are that they are financial contracts that give the holder the right, but not the obligation, to buy or sell an underlying security at a fixed price. Should the holder choose to enforce their right under the terms of the contract, they are said to be exercising their option.