Russian Option

AAA

DEFINITION of 'Russian Option'

An option that gives the holder the right, but not the obligation, to buy a call or sell a put at the best price the underlying asset traded at, during the life of the option. Unlike other options, Russian Options have no expiration date, so the life of the option is whatever the holder chooses it to be.


Russian Options are also known as "reduced regret options" and are very similar to "lookback options."

INVESTOPEDIA EXPLAINS 'Russian Option'

Initially proposed by Shepp & Shiryaev in 1993, Russian Options are basically a form of the American perpetual put option. Due to their potential risk if held for long periods of time, Russian Options are generally recommended for more experienced investors. In addition, these options are generally more expensive than other forms of options and, thus, are not actively traded in the marketplace.

RELATED TERMS
  1. National Welfare Fund (Russia)

    One of two parts of the Russian sovereign wealth fund, the other ...
  2. Lookback Option

    An exotic option that allows investors to "look back" at the ...
  3. Mid-Atlantic Option

    An option that can be exercised at different times during the ...
  4. Synthetic

    A financial instrument that is created artificially by simulating ...
  5. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. Investing Basics

    Pin Down Stock Price With Real Options

    How can you assign a value to what a company may do with its business in the future? We explain how it works.
  2. Options & Futures

    The Importance Of Time Value In Options Trading

    Move beyond simply buying calls and puts, and learn how to turn time-value decay into potential profits.
  3. Options & Futures

    Options Basics Tutorial

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

    Options Trading Strategies: Understanding Position Delta

    Learn more about the position delta hedge ratio and how it can tell you the number of contracts needed to hedge a position in the underlying asset.
  5. Options & Futures

    Should Your Options Go Naked?

    Compare naked strategies to credit spreads and see if the unlimited risk of going naked is worth it.
  6. Options & Futures

    Options Trading Volume And Open Interest

    Learn how these two statistics can give you an edge in trading options.
  7. Options & Futures

    Synthetic Options Provide Real Advantages

    Participate in options trading trading that is simpler, less expensive and easier to manage.
  8. Options & Futures

    What are the most common momentum oscillators used in options trading?

    Read about some of the most common technical momentum oscillators that options traders use, and learn why momentum is a critical concept for options trading.
  9. Options & Futures

    How are Bollinger BandsĀ® used in options trading?

    Use Bollinger Bands to identify volatility changes and place options trades at the right time; profit in bull or bear markets using these strategies.
  10. Options & Futures

    Stock Futures vs Stock Options

    A full analysis of when is it better to trade stock futures vs when is it better to trade options on a particular stock. A quick overview of how each of them works and why would a trader, investor, ...

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center