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What is an American Option?

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An American option is an option contract that can be exercised, i.e. bought or sold, at any time up to the expiration date. Options on individual companies such as Reliance, SBI, etc. are American options. However, no American options are available for index and currency options.

With American options, traders can book profits any time if the price moves in their favor instead of waiting for expiration.

American options are expensive and the premium is higher than a European option because they give the option holder the right to exercise the contract at any time after the contract date and before the expiration date.

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