What does it mean to “exercise” an option?
To amswer your Q, I have to provide the definition of an option. An option is a contract, which has 100 shares of that company’s stock. That contract gives the person who bought that option the right BUT NOT the obligation – to buy that stock on or before a certain date [“expiration Friday” – the 3rd Friday of each and every month] at a specified price [“the Strike Price”]. When an option is exercised means the contract is bought – in the case of a Call option. OR the contract is sold – in the case of a Put option. When Option chains are displayed, Calls are usually above the Puts or to the left of the Strike Price. They are a positive number – simply displayed as a decimal point followed by a number. EXAMPLE and EXPLANATION: .72 means on or before “expiration Friday”, that option has about a 72% probability of expiring at the money or in the money. Puts are usually below the Calls or to the right of the Strike Price. They are a negative number displayed as a minus sign followed by the
