Exotic Options
Superior options trading technology from industry leading optionsXpress
optionsXpress.com
Superior options trading technology from industry leading optionsXpress
optionsXpress.com
Scottrade: Trade Options
Trade options with an online discount brokerage firm, low cost.
www.Scottrade.com
Trade options with an online discount brokerage firm, low cost.
www.Scottrade.com
Wizetrade® Stocks
Let Wizetrade Be Your Trading Guide Live Training and Support Daily.
www.wizetrade.com
Let Wizetrade Be Your Trading Guide Live Training and Support Daily.
www.wizetrade.com
ETF trades $1.50-$3
Trade fast and save money-100 free trades.Commissions from $1.50 to $3
www.sogotrade.com
Trade fast and save money-100 free trades.Commissions from $1.50 to $3
www.sogotrade.com
Power E*TRADE for Options
100 Commission-Free Option Trades Apply Now at E*TRADE Securities
ETRADE.com
100 Commission-Free Option Trades Apply Now at E*TRADE Securities
ETRADE.com
Stock Options Veteran
Teaches You How. I Am Not A Salesman. Free Video DVD Seminar.
www.OptionsMentoring.com
Teaches You How. I Am Not A Salesman. Free Video DVD Seminar.
www.OptionsMentoring.com
Top Daily Option Picks
Turn Small Moves Into BIG Profit Free Trial and Free Report!
OptionInvestor.com
Turn Small Moves Into BIG Profit Free Trial and Free Report!
OptionInvestor.com
Learn To Trade Options
Proven track record allows you to make money while you learn!
www.attitrade.com
Proven track record allows you to make money while you learn!
www.attitrade.com
Stock Options Newsletter
Free OptionsAdvisor newsletter. Powerful option trading knowledge.
www.schaeffersresearch.com/options
Free OptionsAdvisor newsletter. Powerful option trading knowledge.
www.schaeffersresearch.com/options
A-Z Exotic Options Provider Directory
D
Average Strike Rate Option
Description of the characteristics, advantages, and disadvantages of this option, whose strike price is an average over a set period.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this option, whose strike price is an average over a set period.
my.dreamwiz.com
Balloon Options
Description of the characteristics, advantages, and disadvantages of this option, whose underlying value increases if a price target is hit.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this option, whose underlying value increases if a price target is hit.
my.dreamwiz.com
Barrier Cap
Description of the characteristics, advantages, and disadvantages of this interest rate cap that pays out only if a barrier level above the strike price is sustained.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this interest rate cap that pays out only if a barrier level above the strike price is sustained.
my.dreamwiz.com
Barrier Floor
Description of the characteristics, advantages, and disadvantages of this interest rate floor that pays out only if a certain level below the strike price is sustained.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this interest rate floor that pays out only if a certain level below the strike price is sustained.
my.dreamwiz.com
Barrier Option
Description of the characteristics, advantages, and disadvantages of this type of option that is activated or expires if a pre-determined price level in the underlying is reached.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option that is activated or expires if a pre-determined price level in the underlying is reached.
my.dreamwiz.com
Basket Options
Description of the characteristics, advantages, and disadvantages of this type of option whose return-profile is based upon the average performance of a pre-set basket of underling assets.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option whose return-profile is based upon the average performance of a pre-set basket of underling assets.
my.dreamwiz.com
Bounded Barrier Cap
Description of the characteristics, advantages, and disadvantages of this type of option which will pay out, up to a pre-determined limited amount, only if a given level above the strike price is sustained.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option which will pay out, up to a pre-determined limited amount, only if a given level above the strike price is sustained.
my.dreamwiz.com
Bounded Barrier Floor
Description of the characteristics, advantages, and disadvantages of this type of option which pays out, to a pre-determined limit, only if a given level below the strike price is sustained.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option which pays out, to a pre-determined limit, only if a given level below the strike price is sustained.
my.dreamwiz.com
Bounded Cap
Description of the characteristics, advantages, and disadvantages of this type of interest rate option whose characteristics are identical to a bull call spread.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate option whose characteristics are identical to a bull call spread.
my.dreamwiz.com
Bounded Floor
Description of the characteristics, advantages, and disadvantages of this type of interest rate option, whose payoff characteristics are similar to a bear put spread.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate option, whose payoff characteristics are similar to a bear put spread.
my.dreamwiz.com
Caption
Description of the characteristics, advantages, and disadvantages of this type of option the right but not the obligation to buy or sell an interest rate cap at some defined point in the future for a defined premium.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option the right but not the obligation to buy or sell an interest rate cap at some defined point in the future for a defined premium.
my.dreamwiz.com
Chooser Flexible Cap
Description of the characteristics, advantages, and disadvantages of this type of option where the buyer can choose when to use the cap rather than have it automatically exercised.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option where the buyer can choose when to use the cap rather than have it automatically exercised.
my.dreamwiz.com
Chooser Flexible Floor
Description of the characteristics, advantages, and disadvantages of this type of option where the buyer can choose when to use the floor rather than have it automatically exercised.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option where the buyer can choose when to use the floor rather than have it automatically exercised.
my.dreamwiz.com
Chooser Option
Description of the characteristics, advantages, and disadvantages of this type of option where, at the chooser date (prior to expiration), the buyer can choose whether the underlying option to final maturity is a call or put.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option where, at the chooser date (prior to expiration), the buyer can choose whether the underlying option to final maturity is a call or put.
my.dreamwiz.com
Cliquet
Description of the characteristics, advantages, and disadvantages of this type of option which is actually a series of at-the-money options, but where the total premium is determined in advance.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option which is actually a series of at-the-money options, but where the total premium is determined in advance.
my.dreamwiz.com
Compound Options
Description of the characteristics, advantages, and disadvantages of this type of option where the underlying is another option. This option has two elements: 1) the upfront premium and 2) the strike premium which will have to be paid later if t...
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option where the underlying is another option. This option has two elements: 1) the upfront premium and 2) the strike premium which will have to be paid later if t...
my.dreamwiz.com
Contingent Premium Cap
Description of the characteristics, advantages, and disadvantages of this type of interest rate cap where the buyer pays a small up front premium but may have to pay a further premium instalment if LIBOR fixes above a pre-determined "contingency...
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate cap where the buyer pays a small up front premium but may have to pay a further premium instalment if LIBOR fixes above a pre-determined "contingency...
my.dreamwiz.com
Coupe Options
Description of the characteristics, advantages, and disadvantages of this type of series of options, which settle periodically and resets the strike at the worst of (a) the then spot level, and (b) the original strike set in period one.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of series of options, which settle periodically and resets the strike at the worst of (a) the then spot level, and (b) the original strike set in period one.
my.dreamwiz.com
Digital Options
Description of the characteristics, advantages, and disadvantages of this type of option where the buyer receives the same payout irrespective of how far in the money the option closes.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option where the buyer receives the same payout irrespective of how far in the money the option closes.
my.dreamwiz.com
Double Barrier Option
Description of the characteristics, advantages, and disadvantages of this type of option where, in order to receive the option payout, the underlying must not breach either of two defined barriers at any time during the life of the transaction.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option where, in order to receive the option payout, the underlying must not breach either of two defined barriers at any time during the life of the transaction.
my.dreamwiz.com
Flexi Range Floater
Description of the characteristics, advantages, and disadvantages of this type of floater option with a resetable range.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of floater option with a resetable range.
my.dreamwiz.com
Flexible Cap
Description of the characteristics, advantages, and disadvantages of this type of interest rate option where the buyer is only entitled to utilise the cap for a limited and pre-defined number of reset periods.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate option where the buyer is only entitled to utilise the cap for a limited and pre-defined number of reset periods.
my.dreamwiz.com
Flexible Floor
Description of the characteristics, advantages, and disadvantages of this type of interest rate floor where the buyer is only entitled to utilise the floor for a limited and pre-defined number of reset periods.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate floor where the buyer is only entitled to utilise the floor for a limited and pre-defined number of reset periods.
my.dreamwiz.com
Floortion
Description of the characteristics, advantages, and disadvantages of this type of interest rate option which give the buyer the right, but not the obligation, to buy or sell an interest rate floor at some defined point in the future for a define...
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate option which give the buyer the right, but not the obligation, to buy or sell an interest rate floor at some defined point in the future for a define...
my.dreamwiz.com
Foreign Exchange Knock-In Option
Description of the characteristics, advantages, and disadvantages of this type of option that comes alive when a certain barrier is reached.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option that comes alive when a certain barrier is reached.
my.dreamwiz.com
Foreign Exchange Knock-Out Option
Description of this type of option where, if at any time up to and including the maturity the knockout level is reached, the option will expire worthless.
my.dreamwiz.com
Description of this type of option where, if at any time up to and including the maturity the knockout level is reached, the option will expire worthless.
my.dreamwiz.com
Interest Rate Cap
Description of the characteristics, advantages, and disadvantages of this type of interest rate option that guarantees a maximum level of Libor to the borrower.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate option that guarantees a maximum level of Libor to the borrower.
my.dreamwiz.com
Interest Rate Floor
Description of the characteristics, advantages, and disadvantages of this type of interest rate option that guarantees a minimum level of Libor for the buyer.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate option that guarantees a minimum level of Libor for the buyer.
my.dreamwiz.com
Knock-In Caps and Floors
Description of this type of option where the cap or floor only comes alive, or knocks in, when some defined barrier (the knock-in level) is reached on a rollover date.
my.dreamwiz.com
Description of this type of option where the cap or floor only comes alive, or knocks in, when some defined barrier (the knock-in level) is reached on a rollover date.
my.dreamwiz.com
Knock-In Swaption
Description of this type of option where the swaption only comes alive, or knocks in, when some defined barrier is reached during, or at the end, of the option period.
my.dreamwiz.com
Description of this type of option where the swaption only comes alive, or knocks in, when some defined barrier is reached during, or at the end, of the option period.
my.dreamwiz.com
Knock-Out Caps and Floors
Description of this type of option where, if some defined underlying ever reaches the prescribed knock-out level on a rollover date, the cap/floor is terminated or knocked-out.
my.dreamwiz.com
Description of this type of option where, if some defined underlying ever reaches the prescribed knock-out level on a rollover date, the cap/floor is terminated or knocked-out.
my.dreamwiz.com
Knock-Out Swaption
Description of this type of option where, if some defined underlying ever reaches the prescribed knock-out level on a rollover date, the swaption is terminated or knocked-out.
my.dreamwiz.com
Description of this type of option where, if some defined underlying ever reaches the prescribed knock-out level on a rollover date, the swaption is terminated or knocked-out.
my.dreamwiz.com
Ladder Options
Description of this type of option where the strike is periodically reset when the underlying trades through specified trigger levels, at the same time locking in the profit between the old and the new strike.
my.dreamwiz.com
Description of this type of option where the strike is periodically reset when the underlying trades through specified trigger levels, at the same time locking in the profit between the old and the new strike.
my.dreamwiz.com
Lookback Options
Description of this type of option where, at maturity, the buyer can "lookback" and set the most favorable strike to maximize profit between strike and maturity.
my.dreamwiz.com
Description of this type of option where, at maturity, the buyer can "lookback" and set the most favorable strike to maximize profit between strike and maturity.
my.dreamwiz.com
Mark-to-Market Cap
Description of the characteristics, advantages, and disadvantages of this type of option that puts an upper limit on the marked-to-market loss of a swap portfolio.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option that puts an upper limit on the marked-to-market loss of a swap portfolio.
my.dreamwiz.com
Momentum Cap
Description of this type of option where the cap level is dependent on the last rate set for LIBOR.
my.dreamwiz.com
Description of this type of option where the cap level is dependent on the last rate set for LIBOR.
my.dreamwiz.com
Momentum Floor
Description of this type of option where the floor level is dependent on the last rate set for LIBOR.
my.dreamwiz.com
Description of this type of option where the floor level is dependent on the last rate set for LIBOR.
my.dreamwiz.com
Moving Average Cap
Description of this type of interest rate cap where the cap payout is determined by the maximum "average" interest rate over the cap period.
my.dreamwiz.com
Description of this type of interest rate cap where the cap payout is determined by the maximum "average" interest rate over the cap period.
my.dreamwiz.com
Moving Average Floor
Description of this type of interest rate floor where the floor payout is determined by the minimum "average" interest rate over the floor period.
my.dreamwiz.com
Description of this type of interest rate floor where the floor payout is determined by the minimum "average" interest rate over the floor period.
my.dreamwiz.com
N-Cap
Description of this type of option where, once the trigger is reached, the original cap level is replaced with a second cap level for that period.
my.dreamwiz.com
Description of this type of option where, once the trigger is reached, the original cap level is replaced with a second cap level for that period.
my.dreamwiz.com
One Touch Digitals
Description of this type of option where the buyer receives the same payout irrespective of how far in the money the option closes if the underlying reaches the strike at any time from start to maturity.
my.dreamwiz.com
Description of this type of option where the buyer receives the same payout irrespective of how far in the money the option closes if the underlying reaches the strike at any time from start to maturity.
my.dreamwiz.com
Payer Swaptions
Description of the characteristics, advantages, and disadvantages of this type of option where the buyer has the right to enter into an interest rate swap where he pays fixed rate and receives floating.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option where the buyer has the right to enter into an interest rate swap where he pays fixed rate and receives floating.
my.dreamwiz.com
Q-Cap
Description of the characteristics, advantages, and disadvantages of this type of option that provides insurance against the total interest cost over a period.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option that provides insurance against the total interest cost over a period.
my.dreamwiz.com
Q-Floor
Description of the characteristics, advantages, and disadvantages of this type of option that provides insurance against the total interest income over a period.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of option that provides insurance against the total interest income over a period.
my.dreamwiz.com
Receiver Swaption
Description of the advantages and disadvantages of this type of option which confers upon the buyer the right to enter into an interest rate swap where the buyer receives fixed rate and pays floating.
my.dreamwiz.com
Description of the advantages and disadvantages of this type of option which confers upon the buyer the right to enter into an interest rate swap where the buyer receives fixed rate and pays floating.
my.dreamwiz.com
Reflex Cap
Description of the characteristics, advantages, and disadvantages of this type of normal cap where the premium is paid periodically, and each installment is dependent upon a trigger rate being reached.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of normal cap where the premium is paid periodically, and each installment is dependent upon a trigger rate being reached.
my.dreamwiz.com
Rental Caps and Floors
Description of the characteristics, advantages, and disadvantages of these types of options where the premium is paid over time in installments.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of these types of options where the premium is paid over time in installments.
my.dreamwiz.com
Rolling Cap
Description of the characteristics, advantages, and disadvantages of this type of interest rate cap which rolls any un-exercised caplet notional amount onto the next period.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate cap which rolls any un-exercised caplet notional amount onto the next period.
my.dreamwiz.com
Rolling Floor
Description of the characteristics, advantages, and disadvantages of this type of interest rate floor that rolls any un-exercised Floorlet notional amount onto the next period.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate floor that rolls any un-exercised Floorlet notional amount onto the next period.
my.dreamwiz.com
Shout Options
Description of the advantages and disadvantages of this type of option where the buyer can lock-in the profit to date while retaining the right to benefit from any further upside.
my.dreamwiz.com
Description of the advantages and disadvantages of this type of option where the buyer can lock-in the profit to date while retaining the right to benefit from any further upside.
my.dreamwiz.com
Super Flexible Caps and Floors
Description of the advantages and disadvantages of these types of options where the total cap notional amount that may be exercised over the life of the cap is defined.
my.dreamwiz.com
Description of the advantages and disadvantages of these types of options where the total cap notional amount that may be exercised over the life of the cap is defined.
my.dreamwiz.com
Zero Premium Cap
Description of the characteristics, advantages, and disadvantages of this type of interest rate cap with no up-front premium.
my.dreamwiz.com
Description of the characteristics, advantages, and disadvantages of this type of interest rate cap with no up-front premium.
my.dreamwiz.com
I
Application of Finite Difference Method for Pricing Binary Options
Alternative to the Cox-Ross-Rubenstein method of pricing barrier options.
www.intermarkit.com
Alternative to the Cox-Ross-Rubenstein method of pricing barrier options.
www.intermarkit.com
Differences in Theoretical and Actual Prices of Double Knock-Out and Binary Range FX Options
Research note by G. Ioffe of Intermark Solutions.
www.intermarkit.com
Research note by G. Ioffe of Intermark Solutions.
www.intermarkit.com
Pricing Formulas for Double Knock-Out and Binary Range Options
Research note by M. Ioffe and G. Ioffe.
www.intermarkit.com
Research note by M. Ioffe and G. Ioffe.
www.intermarkit.com
M
Valuation of Exotic Options Under Shortselling Constraints
Working paper by Uwe Schmock of ETH-Zurich.
www.math.ethz.ch
Working paper by Uwe Schmock of ETH-Zurich.
www.math.ethz.ch
Pricing Options with Futures-Style Margining
Addresses the pricing of options with futures-style, marked-to-market margining.
campus.murraystate.edu
Addresses the pricing of options with futures-style, marked-to-market margining.
campus.murraystate.edu
R
Passport Options with Stochastic Volatility
Analysis of passport options, or options on the trading profits in an account, when priced using stochastic volatility measures.
www.risklab.ch
Analysis of passport options, or options on the trading profits in an account, when priced using stochastic volatility measures.
www.risklab.ch
Exotic Options
Superior options trading technology from industry leading optionsXpress
optionsXpress.com
Superior options trading technology from industry leading optionsXpress
optionsXpress.com
Scottrade: Trade Options
Trade options with an online discount brokerage firm, low cost.
www.Scottrade.com
Trade options with an online discount brokerage firm, low cost.
www.Scottrade.com
Guide to Exotic Options
How to trade exotic options
Stock options can be divided into two general categories: standard options and exotic options. Standard options, sometimes referred to as plain vanilla options, include American and European options. They have an expiration date and strike price and are typically traded on an exchange. An exotic option has a clause added to it, indicating the option is only active until the stock hits a certain price. Otherwise the exotic option is worthless.
Exotic option strategies are best for individual investors who are looking for more flexibility in their trading. Exotic option pricing depends on a number of features, including the freight exchange rate and underlying index. The pay off at maturity may depend on value at any given point during the life of the contract. There are several types of exotic options, including:
1. Barrier options
2. Asian options
3. Bermuda options
4. Basket (rainbow) options
5. Himalaya options
6. Compound options
7. Digital options
8. Chooser Option
Exotic option strategies are best for individual investors who are looking for more flexibility in their trading. Exotic option pricing depends on a number of features, including the freight exchange rate and underlying index. The pay off at maturity may depend on value at any given point during the life of the contract. There are several types of exotic options, including:
1. Barrier options
2. Asian options
3. Bermuda options
4. Basket (rainbow) options
5. Himalaya options
6. Compound options
7. Digital options
8. Chooser Option
Action Steps
The best contacts and resources to help you get it done
Understand exotic options strategies
Exotic options are not normally traded on a stock exchange. They are usually traded over-the-counter (OTC). Before you begin trading exotic options, make sure you understand the difference between various options, themselves, and trading exotic options strategies. Also understand the risks that are associated with exotic options, such as those in valuation and hedging (a strategy which lessens unwanted business risk and still allows a business to profit from investments).
I recommend:
Read "How to Invest Using Options" by Value Line Publishing. Its guide gives a thorough coverage to all parts of exotic option trading, including buying, selling and finding a broker. Forex offers a user-friendly glossary of common exotic option terms.
Buy and trade exotic options
Find an exotic options broker to help walk you through the market. If you are new to option trading, then you should work with a professional before investing any money. They will break down the whole process into easy to understand steps.
I recommend:
Scott Trade deals with new and seasoned investors and can help you select the right kind of exotic options strategies. Options Xpress is another online brokerage firm that deals in exotic options. For a comprehensive list of online exotic option brokers, check out Business.com.
Find exotic option prices
Exotic option pricing varies, depending on the type of option and current market. Exotic options can be extended or canceled by the callers. Valuation and risk management of many exotic options is based on equity, currencies and interest rates.
I recommend:
Calculate exotic option pricing at Simtro.com. It can calculate all sorts of exotic options, including barrier options, Asian options and compound options.
Tips & Tactics
Helpful advice for making the most of this Guide- There are many websites that allow people to trade exotic options directly. However, if you are new to trading, stick with a broker.
