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What is the difference between American and European style options?

Answer

We offer American and European style options. The main difference between these two styles is the way the options are settled. With an American style option, a physical delivery of the underlying asset takes place on expiration date. With European style options, a cash settlement takes place, hence, cash is settled on the expiration date.

A second difference is that with American style options it is possible to exercise the option before the expiration date (early exercise). This means that the holder of the option can decide to exercise the option at any time and can therefore call for the shares or must deliver them.

Whether the options are American style or European style has no link to the place where the options or underlying assets are traded. Stock options are almost always American style. Index options are often European style.

More information with regard to this topic can be found here.

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DEGIRO is the first wholesale broker for private investors. An online investment platform for all types of investors. DEGIRO enables its customers to invest worldwide at unprecedented low rates. DEGIRO is investing globally for everyone. Previously, investing was often limited to stock exchanges in Europe or the United States. Through one platform, all DEGIRO investors gain access to products and markets worldwide. This means that private investors can spread their investments much better. DEGIRO fits perfectly with the investor who manages his business online. For us, customers do not pay for the salary of unnecessary staff. DEGIRO takes away the last difference between professional and private investors; the fees. Essential for the return of private investors.

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