All termsExercise, Assignment and ExpirationWorth knowing
Exercise by Exception
Exercise by exception is a clearing process under which options meeting specified in the money criteria at expiration may be automatically exercised unless contrary instructions are provided under the applicable procedures.
Why it matters to you
This mechanism helps explain why traders need to understand what happens to positions at expiration rather than assuming no action means no exercise. Exact thresholds and procedures depend on the relevant market, clearing organization and broker.