Option Exercise Styles

There are two main types of options: American and European. The distinction between the two has nothing to do with geography; rather, the owner's ability to exercise the option.

American style options can be exercised any time between their purchase and their expiration. For example, if you bought an American style option that expired in 30 days, you could choose to exercise the option at any time between purchase and expiration.

European style options, however, can only be exercised at their expiration. Even if your option contract is in-the-money two days after purchase, you may not exercise it until it expires. After waiting for expiration, you may or may not find that your contract is still in-the-money.

With any option contract, American style or European style, you can always attempt to sell the contract before it expires.

Because of the freedom afforded by American style options, this type of option contract is generally more valuable than a European style option.

Options involve risk and are not suitable for all investors. Detailed information on our policies and the risks associated with options can be found in Scottrade's Options Application and Agreement, Brokerage Account Agreement, and Characteristics and Risks of Standardized Options (available at your local Scottrade branch office or from the Options Clearing Corporation at 1-888-OPTIONS or by visiting