Automatic Exercise

Business, Legal & Accounting Glossary

Definition: Automatic Exercise

Automatic Exercise

Full Definition of Automatic Exercise

The procedure that prevents in-the-money equity options from expiring and becoming worthless. In this procedure, the clearing firm will exercise certain kinds of options that are in the money without instruction from the option holder, thus allowing option holders who may not be monitoring an option to still capture a profit. Not all options are subject to automatic exercise. Certain options (known as “capped-style options”) become subject to automatic exercise if the price of the underlier hits a certain price (known as the “cap value”), regardless of when the price is achieved (this is only possible in the case of an American-style option). Other options will be subject to automatic exercise just before expiration and at no other time. In such cases, the trigger for automatic exercise is either when the option is in the money, or when it is in the money by a certain amount.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Automatic Exercise. Payroll & Accounting Heaven Ltd.
December 04, 2021
Chicago Manual of Style (CMS):
Automatic Exercise. Payroll & Accounting Heaven Ltd. (accessed: December 04, 2021).
American Psychological Association (APA):
Automatic Exercise. Retrieved December 04, 2021
, from website:

Definition Sources

Definitions for Automatic Exercise are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 20th November, 2021 | 0 Views.