What is an European Option?

A European option is an option contract that can only be exercised on its expiration date. All index options are European options. With a European option, a trader can only execute the trade at the fixed prices on the expiry date of the contract, regardless of how the prices of the underlying asset have developed. European options expire on the last Thursday of every month. In short, European option traders focus exclusively on the expected stock prices on the day the option contract expires before buying or selling an option contract.