What Is the Primary Difference between a European and an American Option?
The key difference lies in the exercise rights. A European option can only be exercised on its expiration date.
An American option, however, grants the holder the right to exercise at any time up to and including the expiration date. This flexibility makes American options generally more valuable than European options, all else being equal.
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.
European Option
Valuation ⎊ A European option, within cryptocurrency derivatives, represents a contract granting the holder the right, but not the obligation, to buy or sell an underlying crypto asset at a predetermined price on a specific date.
Option Holder
Entitlement ⎊ An option holder, within cryptocurrency derivatives, represents the individual or entity possessing the contractual right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date.