Investopedia

Continue to Site »

Basket Option

Filed Under » , ,
Dictionary Says

Definition of 'Basket Option'

A type of financial derivative where the underlying asset is a group of commodities, securities or currencies. Like other options, a basket option gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specific price, on or before a certain date (the holder has the option to buy or sell, or to let the option expire worthless). With a basket option, however, the holder has the right, but not the obligation, to buy or sell a group of underlying assets. A basket option is considered an exotic option.
Investopedia Says

Investopedia explains 'Basket Option'

A currency basket option provides a more cost effective method for multinational corporations to manage multi-currency exposures on a consolidated basis. For example, a global corporation such as McDonald's might buy a basket option involving Indian rupees and British pounds, in exchange for U.S. dollars.

The currency basket option has all the characteristics of a standard option, but the strike price is based on the weighted value of the component currencies (calculated in the holder's base currency). A basket option often costs less than multiple single options.

Articles Of Interest

  1.

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.

  2. How do I use a "basket" option?

    A basket option is an option with an underlying asset "basket" of securities, currencies or commodities. Basket options are a popular way to hedge portfolio risk. Meanwhile, using the basket ...

  3. Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.

  4. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  5. Build A Baby Berkshire

    Get a piece of Warren Buffett's profit by using Form 13F to coattail his picks.

  6. Cash: A Call Option With No Expiration Date

    Cash is generally regarded as a drag on investment returns, but sometimes it may be preferable to hold a substantial cash amount instead of investing it in other assets. This is because having ...

  7. Should You Add A Securities License To Your Qualifications?

    Clients love planners who sell securities, but a securities license takes a lot of work. Learn if the stress and study are worth it.

  8. Business Grads, Land Your Dream Job

    Companies are in need of strategic candidates, not walking resumes. Find out how to set yourself apart from the pack and land the business career you've always wanted.

  9. Exploring Non-Dollar Currencies For Forex Trading

    Learn how investments in foreign currencies can diversify your portfolio.

  10. Financial Solutions For Young Women

    Break through the stereotypes and find out how to manage your life to meet your needs.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  2. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  3. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  4. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  5. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  6. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => Options And Futures [1] => SEG (Active Traders) [2] => SEG (Active Traders:Instrument-Options&Futures) [7] => Markets [10] => SEG (Investors) ) time:7ms