Options exercise

There are several ways to exercise an equity option or futures option; the two most common are European-style options or American-style options.

American-style options may be exercised at any time between the date of purchase and the expiration date for that option. Currently, all equity options in the U.S. have this American-style exercise feature.

European-style options, on the other hand, generally may be exercised only on the last business day before the option expires; there can be no early assignment with this type of option.

There is also a capped option, which is exercised automatically under certain circumstances, at or before the expiration date.

U.S. equity options expire on the Saturday following the third Friday of each month. However, the last time they trade, and the last day on which the owner may exercise the option, is on the third Friday of each month.

If an individual believes a stock price will rise over time, he/she can take advantage of the long-term nature of the options by waiting to exercise them until the market price of the issuer stock exceeds the grant price.

See Also

"Options FAQs on Options Exercise," Options Industry Council

"Options Concepts - Exercise," Chicago Board Options Exchange