Legal Definitions - exercise value

Definition: Exercise value refers to the value that an option holder can derive from using the option.

For example, let's say you hold a call option on a stock with a strike price of $50. If the current market price of the stock is $60, you can exercise your option and buy the stock at the strike price of $50. This means you can immediately sell the stock for a profit of $10 per share. The exercise value of your option in this case would be $10.

Another example would be if you hold a put option on a stock with a strike price of $100. If the current market price of the stock is $80, you can exercise your option and sell the stock at the strike price of $100. This means you can immediately buy the stock back at the market price of $80 and make a profit of $20 per share. The exercise value of your option in this case would be $20.

These examples illustrate how exercise value can be used to generate profits for option holders. By exercising their options, they can buy or sell the underlying asset at a favorable price and make a profit.