TeenAnalyst.com

Exercise
Term category: Derivatives
In 10 words or less:  An action taken by an investor to convert options into shares of stock.

Definition: When you exercise an option, you are converting it into shares of stock.

Advice: Let's say you had one contract of call options on Microsoft with a strike price of $20 per share.  If the stock was at $25, you could exercise your option to buy the stock at $20 per share and have an immediate profit of $500 (100 shares x $5 per share).

 

 

 

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