European Option

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DEFINITION of 'European Option'

An option that can only be exercised at the end of its life, at its maturity. European options tend to sometimes trade at a discount to its comparable American option. This is because American options allow investors more opportunities to exercise the contract.

INVESTOPEDIA EXPLAINS 'European Option'

European options normally trade over the counter, while American options usually trade on standardized exchanges. A buyer of an European option that does not want to wait for maturity to exercise it can sell the option to close the position.

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    The option ticker explains four main things about the option: the underlying stock, whether it is a call or a put option, ... Read Full Answer >>
  3. How do you tell whether an option is American or European style?

    As a quick recap, American-style options are options that can be exercised at the strike price anytime before or on the date ... Read Full Answer >>
  4. Can an option be exercised on the expiration date?

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  5. How does the term 'in the money' describe the moneyness of an option?

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  6. What is the difference between in the money and out of the money?

    In options trading, the difference between "in the money" and "out of the money" is a matter of the strike price's position ... Read Full Answer >>
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