A vanilla option is a category
of options that includes only the most standard components.
A vanilla option has an expiration date and straightforward strike
price. American-style options and European-style options are both
categorized as vanilla options.
The payoff for a vanilla option is as follows:
For a call:
For a put:
where:
St is the price of the underlying asset at time
t.
K is the strike price.
For more information, see Vanilla Option.