Before understanding American options, we must first understand the meaning of options, mainly referring to a contract. Because this contract originated from the American and European markets in the late18th century, it is sometimes divided into American options and European options. This kind of contract gives the contract holder the right to buy or sell an asset at an agreed price within a certain period of time or at any time before that.

American option mainly refers to the option that everyone can exercise on any day after the transaction. Specifically, the option holder can choose to execute or not to execute the contract on any working day before the expiration date of the option, that is, before 9: 30am new york time.

In other words, this option allows it to buy or sell on or before the maturity date around the world, which is a kind of foreign exchange option. Because after all, American options and European options are divided according to the exercise mode of options when buying and selling foreign exchange options.

Options have the following characteristics. First of all, it is a right, which is one of the most important features. Second, the target of the option can be stocks, national debt, currency, stock index, commodity futures and so on.

Because options come from these subject matter, they are called derivative financial instruments. Third, the option has an expiration date, which refers to the expiration date of the option agreed in this contract. Fourthly, the exercise of options is the act of buying or selling the underlying assets according to this contract, and the fixed price generated by this act is called the exercise price.