Bermuda Option
 |
Definition of 'Bermuda Option'A type of exotic option that can be exercised only on predetermined dates, typically every month. Bermuda options are a combination of American and European options. American options are exercisable anytime between the purchase date and the date of expiration. European options, conversely, are exercisable only at the date of expiration. Bermuda options are exercisable at the date of expiration, and on certain specified dates that occur between the purchase date and the date of expiration. Other exotic options include binary options and quantity-adjusting options, often called quanto options for short. |
 |
Investopedia explains 'Bermuda Option'Options are financial derivatives that offer buyers the right, but not the obligation, to buy (call) or sell (put) a security at a particular price on or before a specified date. Bermuda options provide writers with more control over when the options can be exercised, while giving the buyer a contract that is less expensive than an American option, and not as restrictive as a European option. Bermuda options are typically less expensive than American options, because of the larger premiums that American options demand due to their flexibility. |
Related Definitions
Articles Of Interest
-
Options Basics Tutorial
Discover the world of options, from primary concepts to how options work and why you might use them. -
The Controversy Over Option Expensing
There has been much debate over whether companies should treat employee stocks options as an expense. This article examines both sides of the argument. -
When holding an option through expiration date, are you automatically paid any profits, or do you have to sell the option and pay commissions?
Holding an option through the expiration date without selling does not automatically guarantee you profits, but it might limit your loss. For example, if you buy a call option for stock A, which ... -
What do all of the letters in a stock option ticker symbol mean?
The option ticker explains four main things about the option: the underlying stock, whether it is a call or a put option, the expiration month and the strike price. An option ticker is quoted ... -
What's the difference between a regular option and an exotic option?
Before learning about exotic options, you should have a fairly good understanding of regular options. Both types of options share the idea of having the right to buy or sell an asset in the future, ... -
Making It Big On Wall Street
Read about some of the most glamorous Wall Street jobs and what it takes to land one. -
Quants: The Rocket Scientists Of Wall Street
Blend math, finance and computer skills to command a high - and well deserved - salary. -
Build A Baby Berkshire
Get a piece of Warren Buffett's profit by using Form 13F to coattail his picks. -
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 ... -
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.
Free Annual Reports
