The right to purchase or sell the underlying financial item mentioned in an options contarct is exercised when it is put effect. In options trading, the holder of an option has the right, but just not the duty, to purchase or sell the underlying securities of the option at a set price on or before date. Rather than allowing the contract to expiry worthless or closing out the position, the owner of an option will "exercise the option" or employ the right or privilege provided in the contract, by buying or selling the underlying instrument.

To exercise on option means to place into impact the right indicated in the options contract. The purchaser of a call option might exercise his entitlement to purchase the underlying security at the predetermined cost. The purchaser of a put option might exercise his entitlement to sell the underlying security at the specified cost.