What is a European Option?

A European option is the type of options contract that allows investors to exercise their options only on the expiration date of that contract. The contract holder has the right to buy or sell the underlying securities for a specified price; it is known as the strike price of the option.

European alternatives are less adaptable than their American counterparts, but they are more predictable. This article will explain how European options function and how they can be added to an investor's portfolio.

European Call Option Explained

A European option is the type of options contract that allows the option holder to exercise the option only on the expiration date of the option. Option holders have the right but not the obligation to exercise their options. They can also choose not to use the option and let it expire.

The option holder can exercise a call option to buy shares at the strike price if it is a call option. They can execute the option to sell shares if it's a put.

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