American style options can be exercised anytime before expiry, while European style options can only be exercised on the expiry date. For example, American-style call or put options allow you to buy or sell underlying shares at any time before expiry, whereas European-style options only allow exercise on the expiry date. Prior to 2011, Indian exchanges traded both styles but later switched to European style for all contracts. Options are identified by codes: CA/PA for American and CE/PE for European style. 

Key Difference:

• American Style: Can be exercised at any time before expiry

• European Style: Can only be exercised on the expiry date

Example:

• American-style call option: Can buy underlying shares at any time before expiry

• American-style put option: Can sell underlying shares at any time before expiry

• European-style call or put option: Can only exercise on the expiry date

History:

• Before 2011, Indian exchanges traded both American and European-style options

• Individual stocks were American-style, while index options were European-style

• After 2011, NSE switched to European-style options for all contracts

Codes:

• American style: CA (call), PA (put)

• European style: CE (call), PE (put)

Trading vs Exercising:

• Trading: Buying or selling an option contract on the stock exchange, like ordinary shares.

• Exercising: Using the option contract to buy or sell the underlying asset.

Key Point:

In India, only European-style options are available, which can only be exercised on the last Thursday of the month.