What is Difference between American Options and European Options?
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• American options can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are of this type.
• European options are different from American options in that they can only be exercised at the end of their lives.
The options on the Nifty and Sensex are European style options--meaning that the buyer of these options can exercise his options only on the expiry day. He cannot exercise them before the expiry of the contracts as in case with options on stocks. As such the buyer of index options needs to square up his positions to get out of the market.
