European Style Options

European-style options can only be exercised at the end of the option’s lifespan, just before expiration. This is good to know for the option seller because it removes one other component from the options sellers risk concerns: You know that you will not be assigned, no matter what, except just before expiration, provided of course, that the option is in-the-money. You may wish to add these to your option-selling toolkit.

Because they can be exercised only at expiration, they do not carry the risk of early exercise as American-style option do. They are considered less risky than American-style options and generally carry a lower premium, commensurate with the lower rick profile.

Most European-style options are index options. A few that may be of interest are NDZ, the Nasdaq-100 index; RUT, the Russell 200 index, and SPX, the S&P 500 index. For a complete list of European-style index options check with the Options Industry Council.