Investor Glossary-lookback optionInvestor Glossary-lookback optionInvestor Glossary-lookback optionInvestor Glossary-lookback optionInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Lookback Option

The HTML to link to this page
 

A lookback option is a type of exotic option that allows an investor to look back over the period to maturity and determine the ideal execution strategy for the lookback option. There are two primary types of lookback options: fixed and floating. In the case of a fixed lookback option, the investor is allowed to choose the optimal execution point over the entire life of the lookback option, with the strike price being predefined. Whereas with a floating lookback option, the strike price of the option is automatically set at the highest or lowest price of the underlying over the lookback option's life. The flexibility offered by the lookback option significantly decreases the chance that the lookback option will expire worthless. However, at the same time, this flexibility also makes lookback options one of the most expensive types of exotic options. Despite the high cost of lookback options, they are valuable in that their flexibility removes the problem of market timing to a certain extent.



Rate this lookback option definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: ex-dividend, deferred revenue, limit order, FTSE, stock split, APR, 401a, 144a, phantom income, debt service coverage, liquidity ratio, current ratio, diluted share, LIBOR, margin rate, minority interest, ex-dividend date, reverse mortgage, dividends payable, Zero Cost Collar, covered put, balance sheet, 1035 exchange, deferred tax, per diem, VIX, class C shares, wholly-owned subsidiary, required rate of return, EBITDA, real GDP, 1031 exchange, stock market close, in escrow, risk management, inflation, quality assurance, command economy, option premium, average price per share, Key Rate Duration, irrevocable trust, annual return, open position, cancelled check, retained earnings, FICO score, labor relations, implied volatility


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use