2006-10-02 22:24:07 · 3 answers · asked by joe t 1 in Business & Finance ➔ Investing
Option trading developed in America and Europe at roughly the same time. All trading was floor based & 98% of clients were based locally. The different exercise styles reflects the fact that the market in Europe wanted one type of contract and the market in America wanted a slightly different type of contract.
These days derivatives are traded around the world and have many more uses. Therefore both European and American style contracts are made available to everyone.
2006-10-04 05:59:21 · answer #1 · answered by popeleo5th 5 · 1⤊ 0⤋
I don't think it's the name that is important as is the exercise type - which is having the option [pun intended] of early exercise before expiration OR no exercise before expiration.
If I am a buyer of options - I would like to be able to exercise at any time that I would chose to do so if that is the decision. For instance I buy a call on xyz and decide I want to exercise this into stock after a big move up AND then sell a covered call OR buy a 'cheap' put in the next expiration.
On the other hand, if I am a seller of options - I would like to be able to eliminate exercise risk against that sell. Although the majority of options are American exercise, or exercise at anytime, so there isn't the flexibility infered in the answer.
2006-10-03 06:35:47 · answer #2 · answered by sundance 2 · 2⤊ 0⤋
Europeans drive on the left, Americans drive on the right.
We each have our own way of doing things, but similar enough.
2006-10-03 05:42:45 · answer #3 · answered by dredude52 6 · 0⤊ 2⤋