Beginner Question - American vs. European Options

Discussion in 'Options' started by hwelsch2, Sep 29, 2008.

  1. hwelsch2


    I understand the difference between the two - that Amer. Options can be exercised up to and on expiry date, and Europ. Options only on the expiry date. However, and perhaps this is an overly simple question, how can I tell the difference between the two on the option chain? Is it a different letter, or is it something obvious I'm missing? Thanks for the help.
  2. Most all equity options are American.

    Most all indicies are European (i.e. , VIX, SPX, RUT, NDX, DJX, ).

    OEX (S&P 100) is one of the exceptions to this rule, it is American. XEO is the S&P 100 European exercise. So essentially, there are two S&P 100 indicies.
  3. Nanook


    AFAIK European style only offered on Indexes:
  4. hwelsch2


    Thanks to both of you for your quick and very informative responses to this beginner's question. This seems to be a great community.
  5. MTE


    Just to add, there's no way of telling whether the option is American or European by looking at the chains or at the ticker. The only way to know is to look up contract specifications on the exchange's website.
  6. There are further, more important differences that the ability to exercise.

    European options settle in cash, not in shares of the underlying.

    The settlement price (closing price for the expiration period) is NOT a real world trade.

    It is determined by taking the opening price (3rd Friday) of EACH stock in the index and then calculating the theoretical price the index would be, if every stock were trading at its opening price at the same time. Be certain you understand that this settlement price is often significantly higher than the daily published high for the index. Similarly, it's often way lower than the offical published low.

    Be careful if you are ever holding a European style option into expiration Friday morning. In fact, I recommend never doing so.