A cliquet option or also called ratchet option is name given to an exotic option consisting of a series of consecutive forward start options. The first is active on immediate basis.While the second one becomes active when the first expires, etc. Each option is struck at-the-money when it becomes active.
So we can say that a cliquet is, therefore, a series of at-the-money options but here the total premium is determined in advance. One can consider a cliquet as a series of “pre-purchased” at-the-money options. There are two possibilities that the payout on each option can either be paid at the final maturity, or it can be paid at the end of each reset period.
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Tagged as:
at-the-money,
Cliquet Option,
exotic option,
final maturity,
foreign currencies,
foreign exchange,
foreign exchange market,
forex,
Forex trading,
forward start options,
FX market,
option,
ratchet option
In finance, when an investor simultaneously buys an option with a higher premium and sells an option with a lower premium then it results into a debit spread, AKA net debit spread. The investor is referred to as a net buyer and expects the premiums of the two options (the spread) to widen.
Bullish & Bearish Debit Spreads
Debit spreads are needed by the investors to widen for profit.
Calls can be used to construct a bullish debit spread.
Puts can be used to construct a bearish debit spread.
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Tagged as:
AKA net debit spread,
bearish debit spread,
bull-bear phase spread,
Bullish & Bearish Debit Spreads,
bullish debit spread,
Debit spread,
difference in premiums,
difference in strike prices,
For call spreads breakeven,
For put spreads breakeven,
higher premium,
investor,
Maximum Gain,
Maximum Loss,
Maximum Potential,
net buyer,
option,
the spread
