Explain the Difference between American and European Options.
The key difference lies in the exercise date. An American option gives the holder the right to exercise the contract at any time between the purchase date and the expiration date.
A European option, in contrast, can only be exercised on the expiration date itself. Despite the names, this distinction is based on the exercise timing, not the geographic location of the exchange.
Because of the flexibility, American options typically carry a higher premium than equivalent European options.
Glossar
American Options
Exercise Timing ⎊ American Options grant the holder the right, but not the obligation, to execute the option at any point up to and including the expiration date, offering maximum flexibility in managing exposure to underlying asset price movements in crypto derivatives markets.
Expiration Date
Deadline ⎊ The Expiration Date marks the definitive deadline for the option contract, after which the right to exercise or the obligation to perform ceases.