Chooser options

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Imported from previous forum

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Hi,

Could someone explain what chooser options are? I believe they have two strike prices,one for the call and the other for the put.Is this type of an option prevalent in the market ,if so which market(Whether European or American).And how does one set up an exotic option with various features like a chooser option in the system.

Thanks,
Deepak.

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[ original email was from Koorosh Alahiari - alahiari.koorosh@msdw.com ]
These are compound options (meaning they can be decomposed into two seperate options) which give the buyer the right to choose whether
to receive a call or put at a fixed strike price on expiry date, or the cash equivalent. It is like owning both a call and a put at that strike. SO ONLY ONE STRIKE INVOLVED.

I don’t think FIX directly supports exotics (since
exotics are only limited by your imagination!)

But you could probably created an exotic FIX message:)

regards,

Koorosh Alahiari - 7c Information Systems
koorosh@7cis.com

> Hi,
>
> Could someone explain what chooser options are? I believe they have two strike prices,one for the call and the other for the put.Is this type of an option prevalent in the market ,if so which market(Whether European or American).And how does one set up an exotic option with various features like a chooser option in the system.
>
>
> Thanks,
> Deepak.
>

4

> These are compound options (meaning they can be decomposed into two seperate options) which give the buyer the right to choose whether
> to receive a call or put at a fixed strike price on expiry date, or the cash equivalent. It is like owning both a call and a put at that strike. SO ONLY ONE STRIKE INVOLVED.

Thanks, that’s something I’ve learned today :slight_smile:

> I don’t think FIX directly supports exotics (since
> exotics are only limited by your imagination!)
>
> But you could probably created an exotic FIX message:)

No need. In FIX 4.2 you can create and trade multi-leg securities using the SecurityDefinitionRequest and SecurityDefinition messages.

Once you’ve defined the security, you can treat it just like any other as far as FIX is concerned. Just a question of getting your counterparty to take the same view :slight_smile:

Cheers, Dave