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European Style Option

Updated on March 12, 2023

It is a version of an options contract which can be executed on its expiration date only. This means that even if the price of a stock has moved up, investors would not be able to exercise the option. The call or put contract would be actioned only on the date of maturity. European option is a form of option which defines the timeframe within which the optionholders can exercise their contract rights. It has nothing to do with the geographical location of options. Most indexes, in general, use European options due to the ease of accounting it offers to the brokerages.

European Option explained

European Option is an option which gives the buyers or sellers a chance to exercise the contract only on the maturity date.
The other form of options is the American option, which can be exercised any time between the purchase and expiration dates. That means an American option allows investors to realize profits as soon as the stock price moves in their favor. The option contracts in India generally are European options, for which the expiration occurs on the last Thursday of every month.