Exercise
Definition
What is Exercise?
The use of an option holder's contractual right to buy or sell the underlying assetThe asset, rate, index, or reference on which a derivative's value is based..
Example in practice
How This Looks in Practice
The investorA person or organisation that commits capital with the expectation of a financial return. exercises a call and buys shares at the strike priceThe price at which an option holder may buy or sell the underlying asset..
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Related Terms
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesUnderlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.