Explore commonly used personal finance terms.
An American option is a type of options contract that allows the holder to exercise the option at any time before its expiration date, providing more flexibility than a European option, which can only be exercised at expiration. American options are common in the stock and commodity markets, offering strategic advantages for option holders who wish to capitalize on favorable market movements. They are generally more expensive due to this added flexibility, and they are popular in markets where prices fluctuate frequently.
