If early exercise is a bad idea, why American option is more expensive than European [duplicate]
There are a few situations in which it may be advantageous to exercise early. Wikipedia actually has a good explanation: Option Style, Difference in value To account for the American's higher value there must be some   situations in which it is optimal to exercise the American option   before the expiration date. This can arise in several ways, such as: An in the money (ITM) call option on a stock is often exercised just   before the stock pays a dividend that would lower its value by more   than the option's remaining time value.  A put option will usually be   exercised early if the underlying asset files for bankruptcy.[3]  A deep ITM currency option (FX option) where the strike currency has a   lower interest rate than the currency to be received will often be   exercised early because the time value sacrificed is less valuable   than the expected depreciation of the received currency against the   strike.  An American bond option on the dirty price of a bond (such as   some convertible bonds) may be exercised immediately if ITM and a   coupon is due.  A put option on gold will be exercised early when deep   ITM, because gold tends to hold its value whereas the currency used as   the strike is often expected to lose value through inflation if the   holder waits until final maturity to exercise the option (they will   almost certainly exercise a contract deep ITM, minimizing its time   value).[citation needed]