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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

American Style Stock Option

Definition:

American style can include jeans, cowboy hats, or Jersey accents. In the finance world, American style options refer to how you exercise your stock options. No, we don't mean popping them on a treadmill. Stock options let you buy or sell options later at a set price—and it's a privilege you pay for. If your stock option is American style, you can exercise it at any time. With a European Style stock option, you can only buy or sell at the specific price on a specific date (the expiry date).

Example

Let's say you have an option to buy shares of the company you work for at $75/share. The current asking price for the shares is $100. If you exercise your options and buy, you stand to make $25/share if you turn around and sell right away. But hold on a sec. Your strike price (that’s the $75) has an expiry date. If your options are American style, you can exercise them (make good on that strike price) any ol' time. But if you have European style stock options, you'll have to wait until the day your option expires to exercise it. Silly Europeans.