What Is European Option?
A European option can only be exercised at the expiration date, not before. Most crypto options (particularly on Deribit, the dominant crypto options exchange) are European-style. This restriction simplifies pricing and makes the options slightly cheaper than equivalent American options.
How European Option Works
European options are priced using the Black-Scholes model (or variations of it adapted for crypto's unique volatility characteristics). Since early exercise is impossible, the option's time value is always preserved until expiration. Settlement in crypto options is typically cash-settled — the holder receives the difference between strike and spot price rather than the underlying asset.
Why It Matters for Traders
For traders, European options are simpler to manage because there's no risk of early assignment (if selling options) and no decision about when to exercise (if buying). The trade-off is that you can't capitalize on a massive favorable move mid-term without selling the option on the secondary market rather than exercising it.