Exercise
Invoking the right an option gives you — to settle at the strike price.
Definition
Exercise is the act by which an option holder invokes the right granted by the contract — buying the underlying at the strike price (for a call) or selling at the strike (for a put). Only the buyer can exercise; the writer is the counterparty who may be assigned. A European option can be exercised only at expiry, while an American option can be exercised any time up to expiry.
Why it matters
Exercise determines how an in-the-money option finally settles. On NSE, in-the-money options are automatically exercised at expiry, so holders do not need to act manually — but they should be aware of settlement type (cash for index, potential delivery for stocks) and the STT and obligation consequences of letting an ITM option be exercised versus squaring off beforehand.
Example
You hold a NIFTY 24,000 call and NIFTY settles at 24,150 on expiry. The call is in the money by 150 points, so it is auto-exercised and cash-settled — you receive the 150-point difference times the lot size, less charges, without ever buying the index itself.
See it live
Track which strikes are in the money into expiry on TradePulse's live option chain.