Exercise

Using an option’s right — buying (call) or selling (put) the 100 shares at the strike.

To exercise an option means to actually use the right it gives you: buying the underlying at the strike (with a call) or selling it at the strike (with a put). Only the holder of a long option can exercise; the person who sold it can be assigned. American-style options can be exercised any day up to expiration, while European-style ones (most cash-settled index options) can only be exercised at expiry.

In practice, retail traders rarely exercise on purpose. If you own a call that's deep in the money, selling it usually captures more value than exercising, because you'd otherwise throw away any remaining time value. Exercising mainly makes sense to take an actual stock position, or occasionally to capture a dividend just before the ex-date.

A common mistake is forgetting about automatic exercise. Brokers auto-exercise options that expire in the money, so a long call you thought was worthless can suddenly turn into a large stock purchase you can't fund. If you don't want the shares, close the position before expiration instead of letting it settle.

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All options terms

Call Put Strike price Premium Expiration In the money (ITM)At the money (ATM)Out of the money (OTM)Intrinsic value Time value (extrinsic)Delta Gamma Theta Vega Implied volatility (IV)Open interest Assignment Spread Break-even Probability of profit (POP)Assignment risk / early assignment LEAPS Naked (uncovered) option Rho Historical volatility (HV)Volume Bid-ask spread Moneyness Covered call Cash-secured put Vertical spread Iron condor Straddle Strangle Rolling Margin Max pain American-style option European-style option Contract multiplier Debit vs credit Volatility skew The Greeks Underlying Hedge Leverage Expected move Notional value Protective put Collar Butterfly spread Iron butterfly Calendar spread Diagonal spread Credit spread Debit spread Bull call spread Bear put spread Ratio spread Synthetic position The wheel strategy Poor man’s covered call (PMCC)Box spread Put-call parity Pin risk IV crush IV rank / IV percentile Ex-dividend date Deep in the money Weeklys 0DTE (zero days to expiration)Order types (to open / to close)Buying power reduction Cash settlement Market maker Slippage Mid price Black-Scholes model

Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.