Derivatives

American Option

Definition

What is American Option?

An option exercisable at any time up to and including expiration.

Example in practice

How This Looks in Practice

A dividendA payment made from a company's profits to eligible shareholders. may make early exerciseThe use of an option holder's contractual right to buy or sell the underlying asset. of an American call relevant.

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Related Terms

Derivatives

Derivative

A contract whose value depends on an underlying asset, rate, index, or event.

Derivatives

Underlying Asset

The asset, rate, index, or reference on which a derivative's value is based.

Derivatives

Notional Amount

The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.

Derivatives Strategies

Covered Call

A strategy that owns the underlying asset and sells call options against it.

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