 169 apter blica । । । । । । । । । style option it will be very frequently trade यह वो लेए हो टीने है in contrast America's style option maybe exercise at anytime during the contract अगर उसी आम बात करेएे के मरें contract our three month contract अगर उस्वाप्ट्वागी then you have to wait for three months it can be exercise at any time यह अगर तीसरे दिन भी अमारी only few broad-bed indexes have American options. Individual stocks may, bonds may, they are more in ETFs. Indexes may, their utilization is a little less. Example, let's discuss. Call option on the stock, we have a call option, our price is 80 rupees. We have an 80 rupees call option, which means we have a right to buy. We can buy 80 rupees. And this contract period is 1 month. 1st January, 3rd January, 1st January. So, if this European option was there, then we would have only in the closing period, i.e. on the 31st or the last day of the settlement, we would have seen that if the stock is more than 80, i.e. 90, then we would have bought the 80. If the stock was less than 80, then we would not have exercised the option and could have bought it from the 77 market. But it can only be done on the end of the period. But if this was an American option, then in the whole month, if this stock is above our level and we think that we should lock it here, then we can do it. i.e. from 1st January to 31st January, in any spell, any trading date, when we think we can, get a good return, then we can do it. See, there is more advantage in this. In the last day, if it is above, in the whole month, at any time you can get a gain, then you can lock it. So Americans are more flexible. Settlement price is the official closing price for the expiration, establishing which option are in money, subject to auto exercise. i.e. when we said that if this is in our favourable on the expiration, then we said that we gave it the option of auto exercise, that if it is positive, then you immediately lock it. i.e. if it is the option of buying, if it is the option of the market, then you can do the option of auto exercise because we are getting Rs.1 from it. So whatever the case may be, if it is going to be a gain, then just do it. Any option that is in the money, by 1 cent even, or more at expiration, is automatically exercised. Because we have quite defaulted that the expiration is i, if it is European and we are getting a gain, then it will automatically be exercised so that you don't have to stop it. With the American style option, there are seldom surprises. The surprise is that you don't know what's going to happen. So in America, because there are daily rates and daily you can see what's happening, you don't get this kind of immediate surprise. If stock is trading at 40.12, before closing bell and you can anticipate 40 puts will expire worthless because if it is trading at 40, then the right to sell option will be wasted and the call option will be beneficial. So in any day you can determine in case of American option. But surprises comes more in the case of European option. When you own an option you control the right to exercise. Occasionally it may be beneficial to exercise an option before it expires to collect a dividend but in some cases there is a cut-off date that if you have a share then you can collect a dividend. People often have a long option they want to exercise it early so that they can actually share so that they can get a dividend. Option holder doesn't get a dividend he will get a retries appreciation but the dividend will be given in the name of the share. So some people exercise quickly so that they can get a dividend. So in the case of American option there is more possibility in European option there is no possibility. Cash settlement that is normal the advantages to all parties when options are settled in cash normally cash settlement is also beneficial because shares in exchange are not being handled just price difference is being changed half. So you don't even know which new share is coming and you can get the compensating effect along with that. Option owner will receive cash value and option sellers pay the value to the option whose option value is being made the part is going to un-award out of it buyer gets a return or his premium goes away so as a premium there is no loss. The cash value is equal to the intrinsic value means the market value or the option is settled at that rate. Settlement price is often a surprise with European as we discussed there is no surprise in America why is there because we talked about one month sometimes we do option of 3-3 months so we locked the price in January 3 months is a long period after 3 months it goes very high so when it goes very high and you have call option you can gain out of it or when the price goes down so surprise element in European is more because you have to pay the writer in American because there is a daily settlement and you can see the rates so you can manage and structure your portfolio accordingly. So the owner of low priced option worth a few nickels or less have earned hundreds of dollars someone took a very far option like this stock is 100 rupees you took call option that you will buy this in 50 rupees I will buy it in 100 rupees and the chance of coming in 50 rupees is very low and you will get very cheap but what happened is that the stock market changed out and things work out that way out of it if your movement can be in your favour if current price is 100 rupees and you have done call option then you can get money out of it because it is so low no one will be willing to do that so the main concept is that very remote options can be triggered out in case of European more because gap period is more with American option you see the stock approaching strike price and spend a nickel or two to cover it if you think the price is changing then you can adjust your first position with other option or you can gain out or exit there is more surprise element in European because as such you don't get warning you have to trigger once informally you can do it separately but surprise element is more in the case of European