European style option

European Option

An option contract that may only be exercised on the expiration date. For example, if one buy a European call giving him/her the right to buy shares in X expiring on the final Friday in March, the call may only be exercised on the final Friday in March. The implication of a European option is the fact that its value is entirely dependent on the value of the underlying asset at the end of the contract. A holder may not wait for an advantageous price and exercise the option. This contrasts with an American option, which may be exercised at any time prior to expiry.

European style option.

A listed option that you can exercise only on the last trading day before the expiration date is called a European-style option whether it trades on a US exchange, a European exchange, or elsewhere in the world.

For example, many index options listed on various US exchanges are European-style options. In contrast, you can exercise an American-style option at any point between the day you purchase it and its expiration date.

All equity options are American style, no matter where the exchange on which they trade is located.

References in periodicals archive ?
We're proud to offer a European style option," said Stacey Kearin, marketing director at Land O'Lakes, Inc.
The contract, with commodity code VG, is a European style option that will expire three business days prior to the expiration of the underlying CER futures contract.
Fahlenbrach and Sandas study the determinants of the bid-ask spreads for index options using a sample that consists of all trades and quotes for the European style options and the futures on the FTSE 100 stock index from August 2001 to July 2002.
11 (a) European style options settled at the close of the final trading day for options as to contracts for the specified delivery months.
28 /PRNewswire-FirstCall/ -- CME Group, the world's largest and most diverse derivatives exchange, today announced that it will launch European style options on the European gasoil bullet swaps futures contract and average price options on the European gasoil calendar swaps futures contract, on ClearPort(R) and the New York energy trading floor, beginning November 2 for trade date November 3.
Furthermore, this tool provides important sensitivity statistics such as basis point value, duration and convexity, plus valuation models such as Garman Kolhhagen Model for European Style Options, etc.
The options contracts are European style options, settling only on expiration day.
By trading European style options electronically with designated market makers in our most active E-mini S&P 500 options on futures market, CME will be well positioned to significantly increase trading volume in its equity index options," said CME Chairman Terry Duffy.

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