TAPO

AAA

DEFINITION of 'TAPO'

An option in which the profit or loss to the investor is based not solely on the price of the underlying asset at expiration, but on the difference between the strike price and the average price of the underlying asset during the option's term. A TAPO, Traded Average Price Option, (traded average price option) is also known as an Asian option.

INVESTOPEDIA EXPLAINS 'TAPO'

One exchange where TAPOs are commonly traded is the London Metal Exchange, a major marketplace for futures in non-ferrous metals such as aluminum, copper, lead and zinc. These call and put options come in contract lengths ranging from one to 27 calendar months and their settlement price is determined by the monthly average settlement price. TAPOs, traded options and futures are all used as hedging tools.

RELATED TERMS
  1. Index Option

    A financial derivative that gives the holder the right, but not ...
  2. Knock-In Option

    A latent option contract that begins to function as a normal ...
  3. Lookback Option

    An exotic option that allows investors to "look back" at the ...
  4. Option

    A financial derivative that represents a contract sold by one ...
  5. Put Option

    An option contract giving the owner the right, but not the obligation, ...
  6. Embedded Option

    A provision in a security that is an inseparable part of the ...
Related Articles
  1. Pin Down Stock Price With Real Options
    Investing Basics

    Pin Down Stock Price With Real Options

  2. The
    Options & Futures

    The "True" Cost Of Stock Options

  3. The Importance Of Time Value In Options ...
    Options & Futures

    The Importance Of Time Value In Options ...

  4. Options Trading Strategies: Understanding ...
    Options & Futures

    Options Trading Strategies: Understanding ...

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center