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Automatic exercise

• Occurs after an option expires. Each exchange and its clearing house has rules which govern this exercise. There are minimum in-the-money requirements. A holder of an option must inform the clearing house not to automatically exercise an option. These instructions not to exercise may be due to relatively high transaction costs, increases in position limits, or unacceptable alterations in position profiles. Also, after hours trading indications may suggest dramatically different prices than those used to determine the automatic exercise in-the-money amounts.

 
 Embedded terms in definition
 Clearing
Exchange
Exercise
Its
Option
Position
Prices
Trading
Transaction costs
 
 Related Terms
 Automatic stay
Early exercise
Exercise
Exercise or option price
Exercise price
Exercise value

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