Options Glossary, Exercise by Exception Processing, Exercise
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Options Glossary - Most Used Terms
Exercise by Exception Processing
A procedure used by The Options Clearing Corporation as an operational convenience for it's clearing members. Under these proceedings, a clearing member is deeming to have tendered exercise notices for options that are in-the-money by threshold amounts, unless specifically instructed not to do so. This procedure protects the owner from losing the intrinsic value of the option because of failure to exercise. Unless instructed not to do so, all expiring equity options that are held in customer accounts will be exercised if they are in the money by a specified amount.
See Also:
Exercise: Implementing an option's right to buy or sell the underlying security. In the case of a call, the option owner buys the underlying stock. In the case of a put, the option owner sells the underlying stock.
