When I buy or sell a stock, the transaction will increase the stock's trading volume. Instead, suppose I buy an option and decide to exercise it immediately (for whatever reason). When I exercise a call option, I am buying stock from the counterparty. When I exercise a put option, I am selling stock to the counterparty. Does options exercise increase a stock's trading volume?

  • Anything that involves people having to buy and sell stock will impact the volume of that stock, so yes. – Philip Oct 28 '20 at 10:50
  • @Philip So if I exercise an options contract, 100 shares get added to the stock's trading volume? – Flux Oct 28 '20 at 10:51
  • Yes, as to deliver the stock to be delivered you have to purchase it (note it can be pre owned, so doesn't have to hit volume that day, but at some point it has to hit the volume) – Philip Oct 28 '20 at 11:10
  • Nope, they do not. Option delivery is not a trading activity. What if the seller hands shares out of his portfolio? What price would you report them - the option may be DEEP in the money. – TomTom Oct 28 '20 at 13:30
  • See above as I specifically mention pre owned shares. – Philip Oct 28 '20 at 16:11

No. Yes. It does not have to - it all depends whether the stocks you get are bought by the seller or whether he transfers you stock from his portfolio (i.e. I am long, sell you a call, then give you my shares). In the last case there is no transaction happening that hits the trading volume.

  • I'm not sure why this answer has been downvoted. The downvoters did not leave any comments. Did they think that your answer is incorrect? Your explanation makes sense to me... – Flux Oct 29 '20 at 10:25

If satisfying the assignment/exercise of the contract results in transfer of shares to the counterparty, there is no stock exchange transaction since the trade occurs at the strike price between the two counterparties.

If one of the parties needs to acquire the shares in order to deliver or if one of the parties chooses to close the assigned shares then a transaction will occur on the stock exchange.

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