European Option
An option that can be exercised only at expiry (not before).
Quick facts
| Field | Value |
|---|---|
| Category | Options Trading Terminology |
| Use | Learn vocabulary to read chains and manage risk |
Definition
European-style options restrict exercise to expiry. This simplifies assignment behavior and is common for many index options. Your P&L can still change before expiry because the option premium changes, but exercise happens only at expiry.
Quick example
Info
Example: an index option premium fluctuates daily, but exercise/settlement occurs only at expiry.
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 only at expiry (not before).
- Use this term to communicate risk and intent clearly.