DEFINITION of 'Exercise Limit'

A restriction on the amount of option contracts of a single class that any one person or company can exercise within a fixed time period (usually a period of five business days). This limit is in place so that no one person or company can corner or greatly impact the option market.

BREAKING DOWN 'Exercise Limit'

For example, copper options on the CBOE may have a five-day exercise limit of 5,000 contracts, meaning no person or group can trade more than 5,000 copper contracts over any five-day period.

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