American-style option or American Option is an option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded equity options are American style. All equity options are American style, no matter where the exchange on which they trade is located.
American options allow the holder to buy or sell a specified underlying asset, on or before a predetermined expiration date. Since investors have the freedom to exercise their American options at any point during the life of the contract, they are more valuable than European options, which can only be exercised at maturity. The last day to exercise a weekly American option is normally on the Friday of the week in which the option contract expires. Conversely, the last day to exercise a monthly American option is normally the third Friday of the month. Note that the name of this option style has nothing to do with the geographic location.
With an American option, the holder can wait for the most advantageous price to exercise the option. He can exercise the option on any of the trading days up to the expiration date. Due to greater flexibility, American options are more valuable than European-style options, which can only be exercised at maturity.
- ↑ Definiion - What is American-style option The Free Dictionary
- ↑ BREAKING DOWN 'American Option' investopedia
- ↑ American Option - Why it Matters Investing Answers
- Option Exercise & Assignment Explained: The Options & Futures Guide The Options Guide
- Why are American-style options worth more than European-style options? StackExchange
- Understanding Equity Options - The Options Clearing Corporation Options Clearing