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Difference Between American and European Option Trading
John F. Abate is a business administration alumnus of Monmouth University who has served as owner of Marketforce since 1988. Beyond offering guides on topics such as horse race handicapping, John F. Abate develops and distributes guides on casino slots and lotteries. In addition, he is versed in stock option trading.

Option trading resembles betting on horse racing in that those betting are doing so against each other, as opposed to against the house, which is the case in trading stocks. The two different styles of options are American and European, which, while sharing some similarities, differ in crucial aspects.

American-style options, for example, can be exercised at any instance prior to their expiration, whereas European-style options may only be exercised at expiration. All exchange-traded funds and optionable stocks carry American-style options. Conversely, broad-based indices like the S&P 500 trade European-style options, although some offer American-style options.

Another key difference between the two styles concerns the close of the trading period. The close of the Thursday prior to the third Friday of the expiration month signals the end of European index option trading. Trading for American options halts one day later on the third Friday of the month. Settlement prices are also more difficult to predict for European options as they are more susceptible to drastic overnight price changes.
Difference Between American and European Option Trading
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Difference Between American and European Option Trading

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