Define: American Option

This is an option that can be exercised on any business day prior to it’s expiry date.

The majority of options that are trade on most stock exchanges are American options.

With an American option, the holder can wait for the most advantageous price to exercise the option. He can exercise the option on any of the trading days up to the expiration date. Due to greater flexibility, American options are more valuable than European-style options, which can only be exercised at maturity.

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Definitions for American Option are sourced/syndicated and enhanced from:

• A Dictionary of Economics (Oxford Quick Reference)
• BusinessDictionary.com
• Oxford Dictionary Of Accounting
• Oxford Dictionary Of Business & Management

This glossary post was last updated: 29th January 2019.