“American-style” options can normally be exercised on any trading day up to the expiration
As far as American-style options in particular are concerned, you must also be prepared
for the fact that the option may be exercised at a highly unfavourable time
when the markets are against you. If you are then obliged to make physical settlement,
it may be very expensive or even impossible to acquire the corresponding
As the writer of an American-style put option with physical settlement, you are
obliged to accept the underlying assets at the strike price if the buyer exercises the
option, even though it may be difficult or impossible to sell the assets and may well
entail substantial losses.
When you buy a contingent option you must pay the premium only if the market
value of the underlying reaches or exceeds the strike price during the life of the
option (American-style option) or on the expiration date (European-style option).
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