The majority of options on single stocks are American, while options on indexes are European style.

In the Money Options on the day of expiration will be automatically exercised by the broker in case they are not closed, that means the Option will be converted into 100 shares per 1 contract, the Options are exercised/assigned at the strike price and this only in case the Option is In the money ( Stock price above the strike for the call, Stock price below the strike for the Put).

As an example, assume today is the expiration date for an Options contract of stock XYZ in which you were a buyer of a call. The strike price you chose was $150.00.

If XYZ closes in the money above $150, the call buyer will See a new position in his portfolio: a buy of 100 shares to hold XYZ stock bought at $150. The seller of the call, will see a sell position of 100 XYZ sold at $150 while he keeps the credit from the sell Call transferred from the buyer of the call. In case the buyer and the seller do not have enough capital to cover the cost of the positions they will receive a margin call from the broker. Both positions can be closed immediately from the buyer/seller or the broker

Imagine you are the buyer of a put option, let’s use the same strike price of $150.00. On the day of expiration, the current market below $150, the owner of the put option can exercise it and get a sell position of 100 shares at $150, while the seller will be assigned with a buy of 100 shares at $150 plus the premium credited to their account

Traders of American-style options do not utilize the early exercise provision, since They can sell an option back to the options market if the current premium is higher than the initial premium paid at the onset. The trader would earn the net difference between the two premiums minus any fees or commissions from the broker.

However, there are times when options are typically exercised early:   

Most indexes use European options, they can be exercised only on the day of expiration. No shares will change hands during the settlement period for European-style options and is all done on a cash basis (Financial settlement).

Assume the settlement price of SPX is $4010

If you are the owner of a call option Strike 4000, you would receive:

($4010.00 – $4000.00) X 100 = $1,000  The seller of that call option would pay you $1,000

If these were puts, the owner would receive nothing and would be out the premium paid for this contract.

The seller of the put pays nothing but will keep the premium they received.

 Assume the settlement price of SPX is $4010

If you are the owner of a Put option Strike 4020, you would receive:

($4020.00 – $4010.00) X 100 = $1,000  The seller of that Put option would pay you $1,000

Investors can sell a European option contract back to the market before expiry and receive the net difference between the premiums earned and paid initially