European option American option

In terms of option exercise, there are usually three kinds of foreign exchange options in the world: American option, European option and Bermuda option.

European option refers to the option that the buyer must exercise on the expiration date of the option.

American options refer to options that can be exercised on any day after trading. In other words, the option holder can choose to execute or not to execute the option contract before 9: 30am new york time on any working day before the option expires.

The main difference between European options and American options is when to exercise. American options support early exercise, while European options do not. They can only be exercised when they expire. At present, most options trading markets in China adopt European option contracts.

The buyer's "right" in American option trading is relatively large, and the seller's American option risk is correspondingly large. Therefore, under the same conditions, the price of American options is relatively high.