The division between European options and American options is based on the time when the option is exercised. European options can only be exercised on the expiration date, while American options can be exercised at any time before the expiration date. That is to say, investors who hold American options before the expiration date can freely choose the time to exercise their rights.

An option is a derivative that gives the holder the right to buy or sell an asset at a specific price within a specific time in the future. Options are divided into two categories, namely European options and American options.

European options are options that can only be exercised on the expiration date. Before the expiration date, investors cannot choose to exercise the option at will and must wait until the expiration date before exercising. European options are commonly used in financial markets, such as stocks, bonds, commodity futures, etc.

Unlike European options, American options can be exercised at any time before the expiration date. This means that investors who hold American options before the expiration date can choose the time to exercise their rights at any time and decide whether to exercise the option based on the actual situation. For example, if the price of a stock suddenly rises sharply before expiration, investors may choose to exercise their right to purchase the stock early and thereby purchase the stock at a lower price.

Because American options are more flexible, in many cases their prices are higher than European options. Investors need to have stronger judgment and risk control capabilities to conduct transactions.