NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Understanding Derivatives
In the Indian equity derivatives market, a stock option contract that is exercisable only on its expiry date and not before is known as which type of option?
An option that can be exercised only on its expiry date is a European style option. Exchange-traded index and stock options in India follow this style. American style options, by contrast, may be exercised at any time up to expiry.
- AAmerican style option
- BEuropean style optionCorrect
- CBermudan style option
- DAsian style option
Explanation
Index and stock options traded on Indian exchanges are European style, meaning they can be exercised only on the expiry day. American style options can be exercised on any day up to expiry, so that choice is wrong. Bermudan and Asian styles are not used for these exchange-traded contracts.
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