Explain the Difference between ‘European’ and ‘American’ Options

The primary difference lies in when the holder can exercise the option. A European option can only be exercised on its expiration date.

An American option, conversely, can be exercised by the holder at any time between the purchase date and the expiration date. Because of the flexibility of early exercise, an American option is generally worth at least as much as a comparable European option, all else being equal.