Exercise
Also called: exercising an option, exercise notice
Exercise is invoking your right as an option holder to buy or sell at the strike price. For most listed options it's rarely optimal before expiry — selling the option captures its remaining time value, which exercising throws away. In-the-money options are usually exercised automatically at expiry, which catches out holders who lack the cash to take delivery, so closing the position beforehand is the safer default.
Want more than a definition? Learn it in Hull Street →