| || InvestHub.com's |
Finance Dictionary and Glossary of Investment Terms
An exotic option that reduces uncertainties associated with the timing of market entry. There are two types of lookback options, fixed and floating.
Call or put option whose strike price is not determined until the option is exercised. At the time of exercise, the holder can exercise the option at any underlying price that has occurred during the option's life. In the case of a call, the buyer will choose the lowest price, and in the case of a put, the buyer will choose the highest price. The premium on such options tends to be high since it gives the buyer great flexibility, and the writer has to take on a lot of risk.