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
Understand exotic options strategies
Buy and trade exotic optionsFind 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.
Find exotic option pricesExotic 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.
- There are many websites that allow people to trade exotic options directly. However, if you are new to trading, stick with a broker.
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