American Option
An option that can be exercised any time up to expiry (subject to contract rules).
Quick facts
| Field | Value |
|---|---|
| Category | Options Trading Terminology |
| Use | Learn vocabulary to read chains and manage risk |
Definition
American-style options allow exercise before expiry. Early exercise is usually relevant around dividends (for calls) or deep ITM conditions. Many index options are European-style while many stock options globally are American-style—rules vary by market.
Quick example
Info
Example: a deep ITM call holder may consider early exercise around dividend dates if it improves economics (after considering remaining time value).
Where you’ll see it
- Option chain (strikes/expiries/OI/volume)
- Order window (market/limit/SL)
- Positions page (P&L and Greeks)
Common confusion
Avoid treating a single term as a “signal”. Terms help you describe risk; decisions should come from a complete plan (view, sizing, exits, and liquidity).
Summary
- An option that can be exercised any time up to expiry (subject to contract rules).
- Use this term to communicate risk and intent clearly.