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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
The finding that those who report having exercised every day have lower well-being than those who report exercising less frequently has several possible explanations.
The deferred tax asset related to underwater options can be reversed only when the options are canceled, exercised or expire unexercised.
The employee could also consider gifting the exercised shares to family members (granted options that have not been exercised cannot be gifted).
Thus, the six-month period under Section 16(b) was measured from the date an option was exercised.
When early exercise is considered, each node on the stock price tree must be examined to determine whether the options will be exercised early.
1986), rev'g 82 TC 444 (1984), in which the First Circuit held that a taxpayer's shares were subject to a substantial risk of forfeiture until a one-year sellback provision lapsed, because the employer could have compelled its employee to sell the shares of stock back at the price the employee paid at the time he exercised the option if the employee attempted to sell the shares within a year of exercising the option.
Employers, for example, receive a tax deduction for the year in which some types of options are exercised (more on this later).
The adviser has the most opportunity to influence the outcome in the year the option is exercised. Even if the tax year has closed, there are still planning approaches available for clients in these predicaments.
Under Dutch law, tax may actually be assessed prior to the time the option is exercised. Stock options are taxable for Dutch wage, social security, and personal income tax purposes when the employee can exercise the stock option for the first time.
As the tax filing deadline approaches, questions always arise about clients who exercised stock options last year and are now in shock over their tax bills.
1041 protection and concluded that an employee who transfers stock options to a spouse as part of a divorce must recognize income immediately at the time of the transfer, even though no options are exercised.
So if you're 65 or 70 and have never exercised, beginning a strengthening exercise program is the first thing you should do (see p.