What distinguishes American-style options from European-style options?

The key distinction between American-style options and European-style options lies in the exercise timing. American-style options can be exercised at any time before their expiration date, providing flexibility to the holder. This means that if the holder believes that exercising the option at a particular moment will yield a favorable outcome, they can do so regardless of whether the expiration date has arrived.

On the other hand, European-style options can only be exercised at a specified expiration date. This limitation can affect the strategic decision-making of the option holder, as they may miss out on opportunities to buy or sell the underlying asset if market conditions change before the expiration date.

The structure and flexibility of American-style options often result in differences in premiums; however, the defining feature remains their exercise versatility. Therefore, the correct choice emphasizes this ability to exercise at any time prior to expiration.