What does Option exercise mean?
Exercising a stock CALL option means buying the stock at the price set by the option (strike price), regardless of the stock’s price at the time you exercise the option. Exercising a stock PUT option means selling the stock at the price set by the option (strike price), regardless of the stock’s price at the time you exercise the option. Let’s understand it using an example: Mr. Gupta bought 2500-RELIANCE-CALL option contract. The stock is currently trading at Rs. 3000. If Mr. Gupta decides to ‘exercise’ his right he will get the stocks at the rate of 2500 even though the stock is being traded at 3000.
