Exercised Option

An exercised option occurs when the holder of an options contract chooses to execute their right to buy or sell the underlying asset at the specified strike price. For call options, exercising means buying the underlying asset, while for put options, it means selling the asset. Exercising an option is typically done when the option is in-the-money, meaning the current market price of the asset is favorable compared to the strike price. Exercising options can result in significant gains or losses depending on the market conditions, and it is a crucial decision for options traders to maximize their strategy’s effectiveness.

Example

An investor exercises a call option to buy shares of a company at a strike price of $50 when the market price is $60, securing a profit.