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. Put Option

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

    A financial derivative that represents a contract sold by one ...
  3. Asian Option

    An option whose payoff depends on the average price of the underlying ...
  4. European Option

    An option that can only be exercised at the end of its life, ...
  5. Embedded Option

    A provision in a security that is an inseparable part of the ...
  6. American Option

    An option that can be exercised anytime during its life. American ...
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 "True" Cost Of Stock Options

    Perhaps the real cost of employee stock options is already accounted for in the expense of buyback programs.
  3. 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.
  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

    Ratio Writing: A High-Volatility Options Strategy

    Selling a greater number of options than you buy profits from a decline back to average levels of implied volatility.
  7. Options & Futures

    Options On Futures: A World Of Potential Profit

    There's one simple hurdle in the transition from stock to futures options: learning about product specifications.
  8. Options & Futures

    Options -- Accessing Stakes In Apple At Less Cost

    Finding Apple stock costly to trade? Here are multiple ways to trade it through low-cost Apple options.
  9. Investing Basics

    The Strange New World Of The Bitcoin Exchange Futures Market

    We explain the basics of the Bitcoin exchange and futures market.
  10. Options & Futures

    These Are The Top Brokerage Firms For Options Trading

    Trading options? Here is the list of the best brokerage firms for options trading, with features, functionality, and brokerage rates.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center