The exercise of an American-type option or other security prior to its maturity date. An option holder may choose to exercise before expiration in order to receive a dividend distribution (if he holds a stock option) or in implementation of a specific investment purpose. Also, early exercise may be a worthy tactic in case a particular option is deep in the money.

For an in-the-money call option, early exercise could be an optimal course of action. In contrast, it is non-optimal to exercise an American call option on a non-dividend-paying stock before its expiration date. It can be optimal to early exercise an American put option on a non-dividend-paying stock because a put option should always be exercised early if it is sufficiently deep in the money.