Basics
Option exercise
American style, European style, stock delivery, and cash settlement in one compact overview.
Style American or European
American style means the long holder may exercise before expiry. European style means exercise only at expiration.
- American Early exercise is possible.
- European Only settlement at the end.
Stocks and ETFs What happens with stock and ETF options
For stock and ETF options, an ITM contract at expiry often leads to automatic delivery of 100 shares per contract.
- Long Call 100 shares are booked in at the strike.
- Short Put 100 shares are booked in at the strike.
- Short Call 100 shares are called away.
That is why enough buying power or margin should always be available.
Indices Cash settlement in index options
With large index options such as SPX, NDX, or DAX, no shares are delivered. Only the cash value of the intrinsic amount is exchanged.
- Example SPX 5000 call, settlement 5035.
- Intrinsic value 35 points.
- Cash 35 x 100 = 3,500 USD.