lifecycle

Exercise

Learn when exercise may make sense, what checks can affect exercise, and how buyer and writer outcomes differ.


Exercise is the process where an option holder uses the rights defined by the option before or at expiry, if the terms allow it.


When exercise may make sense


For a call option, exercise may be attractive when the referenced skin value is above the strike plus costs.


For a put option, exercise may be attractive when the referenced value is below the strike, subject to the option terms, collateral, and settlement checks.


The buyer should consider:


  • Strike price
  • Premium already paid
  • Fees
  • Settlement costs
  • Available liquidity
  • Custody status
  • Expiry timing
  • Whether exercise checks can pass

    • Exercise is not automatic in every case


    Depending on the product design and beta controls, users may need to explicitly start or confirm exercise. Some flows may require wallet signatures, settlement checks, or operator-controlled steps.


    Typical exercise flow


  • Review the active option.
  • Compare current economics against strike and costs.
  • Start exercise before the deadline.
  • Review wallet and transaction prompts.
  • Wait for custody and settlement checks.
  • Settlement completes, fails, or enters a pending review state.

    • What can prevent exercise


    Exercise may be unavailable or delayed if:


  • The option has expired
  • Required signatures are missing
  • Custody checks fail
  • The skin is not deliverable
  • Network transactions fail
  • Steam restrictions interfere
  • Beta controls pause the flow

    • Buyer considerations


    The premium is already paid and generally should be treated as sunk cost. The buyer should decide whether exercise is worth the additional steps, risks, and costs.


    Writer considerations


    If exercise succeeds, the writer may have to deliver the skin or complete settlement under the accepted terms. The writer may keep the premium but give up upside above the strike.