Article: When you exercise your option, you buy (call) or sell (put) the underlying stock at the price stated in the contract. If your options have value relative to the actual stock price, you are "in the money." A call option allows you to buy stock at the stated strike price. You'll make money if the stock is trading at a higher price than your stock price, because you can buy shares at your lower strike price. You could then turn around and sell those shares at the actual price to make money. If you have put options, you have the right to sell stock at the strike price listed on your contract. You'll make money if you exercise your options when the stock is selling at a much lower price on the open market. You are essentially forcing someone to buy shares at a higher price. You can then buy more shares at the lower price, or simply pocket the difference. For example, if you own a call option for stock at the strike price of $50, and the stock is currently selling at $100, you are "in the money" because you can buy the stock for half the price it's actually trading for. Likewise, if you owned put options for stock at the strike price of $100, and it is currently selling at $50, you are "in the money" because you can force someone to buy the stock at twice the price it's currently trading for. If you have American-style options, you can exercise them at any time you don't have to wait until the expiration date. Exercising an option well before the expiration date means losing potential value. However, waiting it out comes with a risk that the stock price won't move the way you've predicted. For example, suppose you are in the money on call options that don't expire for 6 months. You could exercise them now and buy the stock at your strike price. However, if the stock continues to rise, you could potentially make more money by exercising the option later. Even with American-style options, most options aren't exercised until close to their expiration date. This gives options holders the opportunity to maximize the time value of their options. To exercise a put option, you must first own the underlying stock. If you're exercising a call option, on the other hand, you need the resources to purchase the underlying stock at the strike price. Your broker may have its own rules about how much money you need to have in your account to exercise your options. Call customer service or check the educational resources on your broker's website for specific rules. You can't trade options without a broker. If you have an online broker, you may not have to do anything more than click a button. Your broker will take several steps behind the scenes to exercise your options for you. The process is somewhat complex, but in reality it typically only takes a few minutes. You don't have any sort of relationship with the investor who is assigned the options you exercise. In fact, you likely won't even know who they are. The process is done electronically by the relevant options clearing house. When your options have been exercised, your broker will deposit your profits (less fees and commissions) into your account. For a put option, you'll have a cash deposit. For a call option, you'll have shares in the underlying stock. Commissions and fees for the transaction will be deducted from your account. If you exercised a call option, the commissions and fees will come out of the cash in your account, not from selling the shares of stock you purchased through your options contracts.

What is a summary?
Compare the price of the underlying stock to your strike price. Evaluate the time value of your option. Check your account balance. Instruct your broker to exercise the option. Verify the net result.