What does it mean to exercise an option contract? We take it out for a walk in the park, Any gains and losses due to changes in the market value of the underlying security are market to market, and additional margin is posted if needed. The option is permited to expire without any transactions occuring. When an option is "exercised", the financial transaction specified by the contract is carried out immediately and the option is then terminated.. What is an insurance policy? (Choose the correct answer from the list below.) The body of statutory law, administrative regulations and jurisprudence that governs and regulates the insurance industry A law which requires all individuals in the US to carry health insurance O A financial instrument whose value is tied to the performance of an underlying security A contract in which an individual or other entity pays an ongoing premium" in return for the promise that the insurance company will reimburse them for losses it a specific "adverse event occurs