Derivatives - Option Styles
There are two styles of options, the difference between them being the time at which they can be exercised:
- American options allow the holder to exercise at any time before or at expiration.
- European options allow the holder to exercise only at expiration.
- Most equity options are traded American-style and most debt and currency options, which will be covered soon, are traded European-style.
- Regardless of the timing of the exercise or the nature of the commodity from which the option is derived, the investor is placing a bet that something is going to a) go up, b) go down or c) remain stable.
- In Wall Street jargon, this means the investor is respectively a) bullish, b) bearish or c) neutral.