A cliquet definition is a type of financial contract that allows for periodic payments to be made to the holder, typically at set intervals. The payments are generally based on a predetermined formula, and the contract typically provides for a lump sum payment to be made at the end of the term. Cliquet definitions are often used in investment and hedging strategies, and they can be used to provide income or to protect against losses in underlying investments.
What are types of options?
There are two types of options: puts and calls.
A put option gives the holder the right to sell the underlying asset at a specified price on or before a certain date.
A call option gives the holder the right to buy the underlying asset at a specified price on or before a certain date.
What is a digital call option?
A digital call option is an option that pays a fixed amount if the underlying asset is above the strike price at expiration, or nothing if the underlying asset is below the strike price at expiration. The payoff of a digital call is illustrated in the following diagram:
The value of a digital call option at expiration can be expressed as:
where S is the underlying asset price and K is the strike price.
What are types of exotic options?
Exotic options are financial contracts that differ significantly from more standard vanilla options in terms of their underlying assets, payouts, and expiration dates. While vanilla options are very straightforward and easy to understand, exotic options can be quite complex.
Some examples of exotic options include:
-Binary options: A binary option pays out a fixed amount if the underlying asset expires above or below a certain price.
-Barrier options: A barrier option pays out a fixed amount if the underlying asset expires above or below a certain price, but only if that price is reached before the option expires.
-Lookback options: A lookback option pays out the maximum or minimum price of the underlying asset over the life of the option.
-Asian options: An Asian option pays out a fixed amount if the underlying asset expires above or below the average price of the asset during the life of the option.
-Chooser options: A chooser option gives the holder the right to choose whether it is a call or put option at expiration.
What is forward option? The forward option is an options trading strategy that entails buying and selling options contracts with different expiration dates in order to profit from the difference in the price of the two contracts. The strategy is used when the trader believes that the price of the underlying asset will move in a certain direction, but is unsure of the timing of the move.
For example, let's say that a trader believes that the price of gold is going to increase over the next few months. The trader could buy a gold call option with a three-month expiration date and simultaneously sell a gold call option with a six-month expiration date. If the price of gold increases as the trader expects, the three-month option will increase in value at a faster rate than the six-month option. The trader can then close out the position by buying the six-month option and selling the three-month option, pocketing the difference in the two option prices as profit.
The forward option strategy can be used with any type of options contract - call options or put options - and with any underlying asset.
What are binary options?
Binary options are options contracts with a fixed payout in which you predict the outcome of an underlying asset's price movement. If your prediction is correct, you receive the agreed-upon payout. If your prediction is incorrect, you lose your investment.
Binary options are different from traditional options contracts in several ways. For one, the payouts are fixed, which means that you know exactly how much you will win or lose before you enter into the contract. Traditional options contracts, on the other hand, have variable payouts that depend on the underlying asset's price movement.
Another difference is that traditional options contracts are often longer-term contracts, while binary options contracts are typically shorter-term. Traditional options contracts also often require a higher minimum investment than binary options contracts.
Lastly, with traditional options contracts, you may or may not exercise your option to buy or sell the underlying asset. With binary options contracts, however, you are contractually obligated to exercise your option at the expiration date if your prediction is correct.