Chooser option
A Chooser option or As you like it option (also called preference option in English-speaking countries ) is a special form of a derivative or, more precisely, an exotic option
The option holder has at a defined time before the due date to decide the choice whether his Chooser into a call option or a put option will convert.
Compared to straddles , Choosers are cheaper to buy, the discount being higher the earlier the point in time at which the option holder has to decide whether to convert into a call or sell option. However, with the same equipment, they are more expensive than the corresponding pure buy or sell option.
The price of a chooser increases with the volatility of the underlying asset , whereas the price of the underlying asset plays a subordinate role. This means that you can bet on increasing volatility without being too dependent on the actual movement of the underlying asset.
Individual evidence
- ↑ Kristina Seeliger: Exotic options and their evaluation . diplomica, 2001, ISBN 978-3-8324-4328-3 , pp. 92 ( limited preview in Google Book search).