Option types

Naming conventions are used to help identify properties common to many different types of options. These include:

  • Vanilla option – any option that is not exotic.
    - European option – an option that may only be exercised on expiration.
    - American option – an option that may be exercised on any trading day on or before expiry.
    - Bermudan option – an option that may be exercised only on specified dates on or before expiration.
  • Exotic option – any of a broad category of options that may include complex financial structures.
    - Barrier option – any option with the general characteristic that the underlying security’s price must pass a certain level or “barrier” before it can be exercised.