Consider an option that gives the owner the right to buy a stock for $20 only on the third Friday of May, next year. The option being described is:

Question

Quizplus · Accepted Answer

This option is a European call option, as it can only be exercised on a specific date (third Friday of May, next year) and not before that. It is not an American option because it cannot be exercised at any time before the expiration date. It is a call option because it gives the owner the right to buy the stock at a specified price of $20.

Consider an Option That Gives the Owner the Right to Buy