EARLY EXERCISE: This is defined as the exercise or assignment of an option prior to its maturity date.


EUROPEAN-STYLE OPTIONS: This is an option that can only be exercised at the maturity date. This can also be known as an option which can only be exercised for a short, specified period of time just prior to its expiration, usually a single day.

EXCHANGE: This is any organization, association or group which provides or maintains a marketplace where securities, options, futures, commodities or other derivatives can be traded. The exchange function is to ensure fair trading, as well as efficient distribution of price information for any securities trading on that exchange.

EX-DIVIDEND DATE: This is the first day of the ex-dividend period. The ex-dividend date was created to allow all pending transactions to be completed before the record date. If an investor does not own the stock before the ex-dividend date, they will be ineligible for the dividend payout. For all pending transactions that have not been completed by the ex-dividend date, the exchanges automatically reduce the price of the stock by the amount of the dividend. This is done because a dividend payout automatically reduces the value of the company (it comes from the company's cash reserves), and the investor would have to take in that reduction in value (because neither the buyer nor the seller are eligible for the dividend).

EX-DIVIDEND: A classification of trading shares when a declared dividend belongs to the seller and not the buyer. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment. A security becomes ex-dividend on the ex-dividend date (set by the NASD), which is usually two business days before the record date (set by the company issuing the dividend). In general, a stock's price drops the day the ex-dividend period starts, since the buyer will not receive the benefit of the dividend payout till the next dividend date. 

EXECUTION: This is the completion of an order to buy or sell securities. Furthermore, brokers are required to give investors the best execution possible. 

EXERCISE PRICE (STRIKE PRICE): This is the specified price on an option contract at which the contract may be exercised, whereby a call option buyer can buy the underlying or a put option buyer can sell the underlying. The exercise price is also known as the strike price in which the strike prices is mostly used to describe stock and index options, in which strike prices are fixed in the contract. 

EXERCISE: This is the process of exchanging a right or warrant for the appropriate amount of stock. This can also be known as an action by a stockholder taking advantage of a privilege offered by a company or other financial institution. This includes warrants, options and other exotic financial instruments. When you exercise your stock option, you "trade in" your options for the actual stock. To apply the rights of an option, by buying (in the case of call options) or selling (in the case of put options) the underlying asset.

Exotic options traded on the over-the-counter (OTC) market, where investors can choose the unique terms of the options traded.OUT-OF-THE-MONEY (OTM):

EXPIRATION (EXPIRATION DATE): The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. The expiration date for stock options listed in the U.S. is the third Friday of the expiration month (except when it falls on a holiday, in which case it is on Thursday).

EXPIRATION CYCLE: This is defined as a sequence of dates on which the options of a particular security expire. All options (other than LEAPS) are placed in one of 3 cycles:

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