A European option is a variant of an option contract that limits the exercise of rights to only the day of expiration.
While US options can be exercised early, this comes at a cost, as their premiums are often higher than European options.
Investors can sell the European option contract back to the market before it expires and receive the net difference between the premiums earned and the premiums originally paid.
Investors usually don’t have a choice between buying US or European options, and most indices use European options.
The Black-Scholes option model is often used to value European options.