Exercise
The act of an option holder invoking their right to buy (call) or sell (put) the underlying at the strike price.
Exercising an option means the holder converts the contract into the underlying transaction at the strike price. For a call, the holder buys shares at the strike. For a put, the holder sells shares at the strike (or receives the intrinsic value in cash-settled contracts).
Most retail traders do not exercise options — they sell to close instead, capturing both intrinsic and remaining time value. Exercising discards the time value remaining in the premium.
Automatic exercise applies at expiration for options $0.01 or more in the money (OCC rule), unless the holder instructs otherwise.