Options come in 2 different
types, namely:
1) American Options
American Options can be exercised
at any time between the date of acquiring the options
till the expiry date, upon which the Options become worthless
(if not exercised). The example of Cocoa Corp. we used
in the Basics
of Options (Derivatives) - How Options Work
tutorial is an example of an American Option where the
option was exercised at many intervals before the expiry
date.
2) European Options
European Options can only be exercised
upon the end of their lives (upon their expiry dates).
Note: The names European and American
Options have nothing to do with their geographic locations.
Long Term Options
The American and European Options
we talked about above are both short-term Options where
the expiry date is within 1 year. However, Long Term Options
are available for long term investors where the expiry
date expands to multiple years, even 2-3 years sometimes.
These Options are also known as Long Term Equity
Anticipation Securities (LEAPS).
Exotic Options
Options
that have Calls and Puts are known as Exotic Options.
