What does stock option exercise mean?

Stock option exercise refers to the process in which investors holding stock options choose to exercise their rights in the stock option contract to buy or sell stocks according to the conditions stipulated in the contract. Exercise enables the option holder to buy or sell the underlying stock at an agreed-upon price within a specified time.

Stock options are typically issued by a company to its employees or other related parties as part of an incentive or reward structure. Individuals or institutions holding stock options can, before a specific exercise date, buy or sell the underlying stock in the form of equity selection based on the exercise price specified in the option contract.