Options & derivatives

American and European options

American options can be exercised any time before expiry; European ones only at expiry.

How it works

The distinction is about exercise style, not geography. Most single-stock options are American; most index options are European.

American options are worth slightly more, since early exercise is an additional right — most valuable around dividends.

OptionA contract giving the right, but not the obligation, to buy or sell something at a set price by a set date.
ExpiryThe date after which an option ceases to exist.
AssignmentBeing required to fulfil an option you sold, because the buyer exercised it.

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Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.