Exercise (redirected from active exercise)

Exercise

To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security.

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exercise

To require the delivery (for example, a call option) or to force the purchase (for example, a put option) of the option's underlying asset. Many options expire without being exercised because the strike price stated in the option is unfavorable to the holder.

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Exercise

In option contracts, to buy (in the case of a call) or sell (in the case of a put) the underlying asset. The option holder has no obligation to exercise the option, and only does so if he/she believes it benefits him/her. Depending upon the nature of the option, this may be done at any point during the life of the contract, or it may only be done on the contract's expiry date. The strike price of the sale is agreed-upon in the option contract, that is, before the option is exercised.

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Exercise. When you act on a buying or selling opportunity that you have been granted under the terms of a contract, you are said to exercise a right.

Contracts may include the right to exchange stock options for stock, buy stock at a specific price, or buy or sell the security or product underlying an option at a specific exercise price.

For example, if you buy a call option giving you the right to buy stock at $50 a share, and the market price jumps to $60 a share, you'd likely exercise your option to buy at the lower price.

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Exercise

What Does Exercise Mean?

An action taken by a stockholder in response to a certain privilege offered by a company or another financial institution. This includes warrants, options, and other exotic financial instruments.

Investopedia explains Exercise

When an investor exercises a stock option, that investor “trades in” his or her options for the actual stock.

Related Terms:
• Call Option
• Expiration Date
• Put Option
• Strike Price
• Warrant