Various Options

Under the 'Various Options' group are a number of exotic options that did not fit in the other categories.

• Executive stock options commonly form part of a high-level employee or executive's remuneration package. The payoff of the option is related to the company's stock value. Calculating the value of the option itself is harder as the possibility that the employee or executive may loose their job - and hence their stock options - has to be taken into account.
• A forward start option is an advance purchase of a put or call option that will become active at some specified future time. A premium is paid in advance. The underlying asset and time to expiration are specified at the time of the purchase; however the strike price is set when the option becomes active.
• Options on options (sometimes referred to as compound options) are exactly what their name implies. They give the holder the right to buy (or sell) the underlying option.
• A Ratchet option (also known as a cliquet option) is a series of consecutive forward start options. The first is active immediately; the second becomes active at the expiry of the first, the third at the expiry of the second, and so on. Each resets the strike value at the then-current price level, at which time the option locks in the difference between the old and new strike and pays that out as the profit.
• A discrete time-switch call (or put) option allow the holder to receive an amount at expiration for each time interval that the underlying asset price has been above (or below) the strike price.
• A two-asset correlation option is linked to two underlying assets. It pays off like a vanilla option on one underlying asset at expiration if the value of the other underlying asset is in a specified range.

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