Automatic Exercise

AAA

DEFINITION of 'Automatic Exercise'

A procedure implemented to protect an option holder where the Option Clearing Corporation will automatically exercise an "in the money" option for the holder.

INVESTOPEDIA EXPLAINS 'Automatic Exercise'

Think of it as an insurance policy for those who aren't as tuned in with the 3rd Friday of every month.

RELATED TERMS
  1. Expiration Date

    The last day that an options or futures contract is valid. When ...
  2. In The Money

    1. For a call option, when the option's strike price is below ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Out Of The Money - OTM

    A call option with a strike price that is higher than the market ...
  5. Strike Price

    The price at which a specific derivative contract can be exercised. ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. Naked Call Writing: A Risky Options ...
    Options & Futures

    Naked Call Writing: A Risky Options ...

  2. Options Basics Tutorial
    Options & Futures

    Options Basics Tutorial

  3. Going Long On Calls
    Options & Futures

    Going Long On Calls

  4. Business Owners: Avoid Enron-esque Retirement ...
    Options & Futures

    Business Owners: Avoid Enron-esque Retirement ...

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center