Exercise
The act of an option buyer using their right to buy (call) or sell (put) the underlying at the strike price.
Explanation
American-style options can be exercised at any time before expiration, while European-style options can only be exercised at expiration. Most options are closed before expiration rather than exercised. Automatic exercise occurs at expiration for options that are in the money by $0.01 or more.
Example
You hold a 100-strike call on XYZ. The stock is at $110. You exercise the call, buying 100 shares at $100 regardless of the current $110 market price.