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American-style Option

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An American-style option is a put or call option that may be exercised on or before its expiration date. The American-style option is more difficult to price than otherwise identical European-style option because the later, unlike the American-style option, can only be exercised at maturity. Numerical methods are used to get an approximate value of an American-style option when no analytic formula exists. An American-style option can be traded on a European exchange, and vice versa. The volume of American-style options traded every business day is enormous, as most exchange-traded options are American-style options. The first American-style option contracts had publicly traded stocks as the underlying asset. Today the American-style option is traded not only for stocks, but other assets, such as indices and futures.



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