Types of Derivatives-Cont’d Options-Cont’d An option can also be categorized according to when it maybe exercised by the buyer or the exercise style: European option can only be exercised at the expiration date of the contract. American option can be exercised anytime on or before the expiration date. Bermuda option or Atlantic option – is an option which can be exercised before the expiration date but only on specified dates. The option buyer has substantial upside return potential, while the option writer has substantial downside risk. The maximum profit that the option writer can realize is the option price.
