FEATURES | AMERICAN STYLE OPTIONS | EUROPEAN STYLE OPTIONS |
Trading | Typically traded on exchanges | Typically traded over-the-counter (OTC) |
Premium Benefits | Higher premiums due to greater flexibility | Lower premiums due to exercise restrictions |
Settlement Type | Often relate to individual stocks or ETFs, can settle in stock or cash | Tend to relate to indices, settle in cash |
Final Value Based On | Last closing trade price | Opening price of index components |
Trading Volume | Higher trading volume | Lower trading volume |
Time of Exercise | Can be exercised at any time before expiration | Can only be exercised at the expiration date |
Pricing Options | Binomial or lattice based model preferable with early exercise | Black-Scholes model is more accurate |
Type of Assets | Typically related to equities | Typically pegged to indices |
ITM VS OTM OPTIONS
The concept of an option being in-the-money (ITM) or out-of-the-money (OTM) depends... Read More
OPTIONS PROBABILITY CALCULATOR
This calculator specializes in determining the Probability of Profit (POP) for options trading strategies... Read More