Commodity European/American Option

[simteq]

Referring to com-ex8-oil-call-option-strip.xml and com-ex9-oil-put-option-american.xml.
My understanding of a difference between european and american options is that European can only be exercised at Expiry date but american can be exercised at any time up to Expiry date however, these two examples sho the European have a list of expiration date and the American having only one.

Clarification required please!!

[roma]

Option strip = series of options.
In this example it is the same as 3 options 10 000 MT each with expiration in the end of each month.

[simteq]

Hi, thanks for the reply but I am new to this and find it quite confusing, if there are in fact three options bundled into one trade ( there is only one trade ID ) is there only one premium for the trade or should there be three premiums. Would this not be better handled as three separate options contained within a Basket Option

Thanks
David

[roma]

Strip options are used in commodity market. One trade, one premium, but several expirations at same strike. It trades as one product.
For example you can buy fuel for all 3 winter mounts (10k in each mount at 6$) and pay one premium for it. It is like long-time delivery contract. Strip options just cheaper and easier to work with, than buy basket of options.

[simteq]

Hi Roma
Thanks for the explanation, it now makes sense

Regards
David

[Author]

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