Exercise Type
The option style, as specified in the contract, determines when, how, and under what circumstances, the option holder may exercise it. It is at the discretion of the owner whether (and in some circumstances when) to exercise it.
- European - European-style option contracts may only be exercised at the option's expiration date. Thus they can never be worth more than an American-style option with the same underlying, strike price and expiration date.
- American - American-style option contracts can be exercised at any time up to the option's expiration. Under certain circumstances (see below) early exercise may be advantageous to the option holder.
- Bermudan - Bermudan-style options contracts may only be exercised on specified dates. Bermudan-style options are common in the interest rate options and swaps markets.
Read more about this topic: Exercise (options)
Famous quotes containing the words exercise and/or type:
“See how peaceful it is here. The sea is everything. An immense reservoir of nature where I roam at will.... Think of it. On the surface there is hunger and fear. Men still exercise unjust laws. They fight, tear one another to pieces. A mere few feet beneath the waves their reign ceases, their evil drowns. Here on the ocean floor is the only independence. Here I am free.”
—Earl Felton, and Richard Fleischer. Captain Nemo (James Mason)
“Time has an undertaking establishment on every block and drives his coffin nails faster than the steam riveters rivet or the stenographers type or the tickers tick out fours and eights and dollar signs and ciphers.”
—John Dos Passos (1896–1970)