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1.4- Option Styles

Option styles refer to the type of exercise that takes place. There are two types of styles that investors needs to be concerned with:

American-style


American-style options allow the option buyer to exercise the option contract at ANY TIME before expiration.

European-style


European-style options allow the option buyer to exercise the option contract ONLY on the last trading day before expiration.

Typically, option contracts that represent underlying stocks are American-style and contracts representing indexes (DOW Jones, S&P 500, etc.) are European-style.