Exercise

In finance, exercise refers to the act of using a financial instrument to purchase or sell an underlying asset. For example, if you have a call option on a stock, you can exercise the option to buy the stock at the strike price. If you have a put option on a stock, you can exercise the option to sell the stock at the strike price.

The decision of whether or not to exercise an option depends on a number of factors, including the current price of the underlying asset, the strike price of the option, and the time value of the option. If the current price of the underlying asset is above the strike price of the option, it is usually in the option holder's best interest to exercise the option. If the current price of the underlying asset is below the strike price of the option, it is usually in the option holder's best interest to let the option expire.

There are a few different ways to exercise an option. One way is to simply call the option writer and tell them that you want to exercise the option. Another way is to submit a written exercise notice to the option writer. The option writer will then have a certain amount of time to deliver the underlying asset to the option holder.

If an option is exercised, the option writer is obligated to deliver the underlying asset to the option holder. The option holder is then obligated to pay the strike price of the option to the option writer.

Exercise can also refer to the act of selling a financial instrument before its expiration date. For example, if you have a stock that you want to sell, you can exercise your right to sell the stock to your broker.