Definition of 'Cliquet'
An extended exotic option that periodically settles and resets its strike price at the level of the underlying during the time of settlement. Each forward start option comprising the cliquet enters into force when the previous option expires. Investors can opt to receive their payout when each option expires or wait until the entire series has played out.
Also known as "ratchet option" or "cliquet option."
Investopedia explains 'Cliquet'
For example, a three-year cliquet option with a strike of 1,000 would expire worthless on the first year if the underlying was to be 900. This value ($900) would then be the new strike price for the following year and should the underlying on the settlement be 1,200, the contract holder would receive a payout and the strike would reset to this new level. Higher volatility provides better conditions for investors to earn profits.