Russian Option

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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."

BREAKING DOWN '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.

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RELATED FAQS
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    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
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    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
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    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
  4. What is the difference between derivatives and options?

    Options are one category of derivatives. Other types of derivatives include futures contracts, swaps and forward contracts. ... Read Full Answer >>
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    In a rights offering, rights are distributed to shareholders based on the number of shares they already own. What Is a Rights ... Read Full Answer >>
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