{"id":56518,"date":"2024-11-21T16:38:21","date_gmt":"2024-11-21T15:38:21","guid":{"rendered":"https:\/\/www.captrader.com\/?post_type=glossar&#038;p=56518"},"modified":"2024-11-21T16:38:22","modified_gmt":"2024-11-21T15:38:22","slug":"european-option","status":"publish","type":"glossar","link":"https:\/\/www.captrader.com\/en\/glossar\/europaeische-option\/","title":{"rendered":"European option"},"content":{"rendered":"<p class=\"wp-block-paragraph\">There are basically two different types of options that affect when an option can be exercised. In this article, you will find out what a European option is, what alternatives there are and how you can recognize the type of option.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Exercise of a European option<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Holders of a European option can sell (put) or buy (call) an underlying asset at a predetermined price, also known as the strike, on the expiry date. With this variant there are <strong>No possibility to exercise the option in advance<\/strong>.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">European option vs. American option<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>American options<\/strong> have the advantage that they give the owner the right, <strong>at any time during the term<\/strong> exercise the option. This goes hand in hand with special advantages, such as greater flexibility and taking advantage of opportunities to maximize profits.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>However, owners must pay a higher price to obtain this right<\/li>\n\n\n\n<li>European options differ in that they do not offer this possibility<\/li>\n\n\n\n<li>Accordingly, the names do not provide any information about where the options are traded; they are different types of execution<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">How do I recognize European options?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Investors themselves cannot choose whether they want to trade their option in European or American style. The determination is made by the <strong>Type of underlying<\/strong> and the corresponding <strong>Futures exchange<\/strong>.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>In general, options on ETFs and equities tend to be traded in the US, while options on commodities and indices tend to be traded in Europe<\/li>\n\n\n\n<li>You can find out exactly what type of option is available on the respective trading platform<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The prices for <strong>American options<\/strong> are usually somewhat more expensive due to the additional option for early exercise. <strong>more expensive<\/strong>. Owners pay for the <strong>Greater flexibility <\/strong>and the resulting opportunities.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"553\" src=\"https:\/\/www.captrader.com\/wp-content\/uploads\/2024\/10\/CapTrader-Optionen-eurpaeische-Ausuebung.jpg\" alt=\"Screenshot of a financial trading platform displaying details of a DAX 40 index option, including contract details, strike price and European strike style. This European option highlights the strategic elements that are critical to making informed trading decisions.\" class=\"wp-image-56814\" srcset=\"https:\/\/www.captrader.com\/wp-content\/uploads\/2024\/10\/CapTrader-Optionen-eurpaeische-Ausuebung.jpg 800w, https:\/\/www.captrader.com\/wp-content\/uploads\/2024\/10\/CapTrader-Optionen-eurpaeische-Ausuebung-300x207.jpg 300w, https:\/\/www.captrader.com\/wp-content\/uploads\/2024\/10\/CapTrader-Optionen-eurpaeische-Ausuebung-768x531.jpg 768w, https:\/\/www.captrader.com\/wp-content\/uploads\/2024\/10\/CapTrader-Optionen-eurpaeische-Ausuebung-18x12.jpg 18w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/><figcaption class=\"wp-element-caption\">CapTrader TWS Trader Workstation, Menu Item: Description, Index: DAX, European Exercise Style<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">European call option example<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Once the term has expired, the buyer of the option can decide whether or not to exercise it. The <strong>Exercise <\/strong>only makes sense,<strong> when profits are made<\/strong> can. In the case of a call option, the underlying asset could be bought at the strike price, while a put option could be sold.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If the option is exercised, the <strong>Vendor <\/strong>the option the<strong> Either deliver or receive the underlying asset<\/strong>. Through the <strong>Option premium<\/strong>he received, he was compensated for this duty.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion: European option simply explained<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">With a European option, traders can change the underlying <strong>buy or sell at the end of the term<\/strong>. You cannot decide to exercise the option beforehand at another time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>American options <\/strong>work differently and offer the possibility of exercising the option at any time during the term. This right is normally subject to a <strong>Premium <\/strong>an.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Mostly <strong>American-style options on shares and ETFs<\/strong> traded, while <strong>European-style options on commodities or indices <\/strong>can be traded. If you want to know what type of option you have, you can look it up on your trading platform.&nbsp;<\/p>","protected":false},"author":20,"featured_media":0,"template":"","class_list":["post-56518","glossar","type-glossar","status-publish","hentry"],"acf":{"blog_summary":"","blog_faq_schalter":"nein","faq_uberschrift":"","blog_faq_loop":null},"_links":{"self":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/glossar\/56518","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/glossar"}],"about":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/types\/glossar"}],"author":[{"embeddable":true,"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/users\/20"}],"wp:attachment":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/media?parent=56518"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}