The Two Styles of Options
There are mainly two basic styles of options available as American style options and European style options. They are differentiated according to the trades possible against expiration date. Although named by regions they have nothing to do with them.
American style options can be exercised for underlying product at any time between the date of purchase and expiration date. They are the common options traded through exchanges. All the stock options available come within this category. American options are considered more valuable than European options.
European style of options can only be exercised at the expiration date. They are mainly index options and are less popular and valuable. A trader holding European options cannot exercise the option for cash even if he can get huge profit at any time between purchasing date and expiring date.
American style options can be exercised for underlying product at any time between the date of purchase and expiration date. They are the common options traded through exchanges. All the stock options available come within this category. American options are considered more valuable than European options.
European style of options can only be exercised at the expiration date. They are mainly index options and are less popular and valuable. A trader holding European options cannot exercise the option for cash even if he can get huge profit at any time between purchasing date and expiring date.
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