I bought a put option with strike 453 for 3.23 per share with the current underlying price at 448. This means that I should be able to exercise immediately and make 1.77 per share profit. I’m using power E*Trade and there appears to be no option for exercising options at all. I’ve searched google and the web and nobody shows how to exercise options early. Also why does this appear to be making something from nothing. Am I misunderstanding anything here??
Options never sell for less than their intrinsic value - you were seeing an after-hours quote for the ETF or the options, but not both. The market just opened and SPY opened at 450.7 which would make your option price more reasonable, and makes me think that you were seeing the previous day's close for SPY rather than an after-hours price that the option price was based on. The fact that you can't exercise it immediately is likely also because it was after-hours.
Even if you could have exercised your option, you would have either sold existing shares at 453, or you would ended up with a short position on SPY that you would not have been able to cover at 448, so you would not have immediately profited.
Something is wrong here. With the underlying at $448, the intrinsic value of a $453 put is $5. You're not going to be able to buy it for $3.23
Be that as it may, if you exercise your $453 put, you go short the underlying at $453. You don't automatically lock in the difference just by exercising.
Stop googling the internet for an answer. Call E*trade and ask what the web site procedure is for exercising American options.