European Style Stock Option

A stock option that takes a three-hour break from work during the afternoon and eats dinner at about nine o'clock at night.

Also, European options carry one important expiration distinction compared to American-style options (despite the names, the options don't have any specific connections to different regions of the world).

Any and every stock option has an expiration date. You buy an option that gives you the right to purchase 500 shares of AAPL stock at $190. It expires on the 3rd Friday of next month.

An American option allows you to exercise that right any time between now and the expiration date. (U-S-A! U-S-A!) With a European option, you can only exercise the contract at the expiration date.

So, for the European option, you have to make the choice on that 3rd Friday. If the stock goes to $195 on the 15th day, or whatever the midpoint is before the option expires, tough noogie. You can't convert it; you have to wait. If by that 3rd Friday, it goes back down to $185, you're out of luck. The European Option system leaves a lot more room for stock manipulation like this, as you can guess.

Not so with the American option. If it gets to $195 on the 15th day, you can exercise it right away and cash in your $5 per share. Obviously, this makes American options more flexible, and therefore more valuable. As a result, the American options usually cost more.