What is an 'Asian Option'
An Asian option is an option type where the payoff depends on the average price of the underlying asset over a certain period of time as opposed to standard options (American and European) where the payoff depends on the price of the underlying asset at a specific point in time (maturity). These options allow the buyer to purchase (or sell) the underlying asset at the average price instead of the spot price.
Asian options are also known as average options.
There are various ways to interpret the word “average” and that needs to be specified in the options contract. Typically, the average price is a geometric or arithmetic average of the price of the underlying asset at discreet intervals, which are also specified in the options contract.
Asian options have relatively low volatility due to the averaging mechanism. They are used by traders who are exposed to the underlying asset over a period of time such as consumers and suppliers of commodities, etc.
BREAKING DOWN 'Asian Option'
Asian options are in the "exotic options" category, and are used to solve particular business problems that ordinary options cannot. They are constructed by tweaking ordinary options in minor ways. In general (but not always), Asian options are less expensive than their standard counterparts, as the volatility of the average price is less than the volatility of the spot price.
Typical uses include:
 When a business is concerned about the average exchange rate over time.
 When a single price at a point in time might be subject to manipulation.
 When the market for the underlying asset is highly volatile.
 When pricing becomes inefficient due to thinly traded markets (low liquidity markets).
This type of option contract is attractive because it tends to cost less than regular American options.
Asian Option Example
For an Asian call option using arithmetic averaging and a 30day period for sampling the data.
On November 1st, a trader purchased a 90day arithmetic call option on stock XYZ with an exercise price of $22, where the averaging is based on the value of the stock after each 30day period. The stock price after 30, 60, and 90 days was $21.00, $22.00, and $24.00.
The arithmetic average (mean) is (21.00 + 22.00 + 24.00) / 3 = 22.33.
The profit is the average minus the strike price 22.33  22 = 0.33 or $33.00 per 100 share contract.
As with standard options, if the average price is below the strike price, the loss is limited to the premium paid for the call options.

Average Strike Option
An average strike option is an option type where the payoff depends ... 
Exotic Option
An exotic option is more complex or has a different structure ... 
Vanilla Option
A vanilla option gives the holder the right to buy or sell an ... 
Path Dependent Option
The payout for a pathdependent option depends on the price history ... 
Average Rate Option (ARO)
An average rate option (ARO) is an option used to hedge against ... 
Outright Option
An outright option is an option that is bought or sold individually. ...

Trading
Trading Options on Futures Contracts
Futures contracts are available for all sorts of financial products, from equity indexes to precious metals. Trading options based on futures means buying call or put options based on the direction ... 
Trading
The Basics Of Option Price
Learn how options are priced, what causes changes in the price, and pitfalls to avoid when trading options. 
Trading
Options Pricing
Options are valued in a variety of different ways. Learn about how options are priced with this tutorial. 
Trading
Google Stock Too Expensive for You? Try Options
Learn how to invest in Google (now Alphabet, Inc.) and other highvalue stocks with less capital by using options. 
Trading
Futures and Options: How Are They Different?
Options and futures may sound similar, but they are very different. Futures markets are a bit simpler to understand but carry a greater risk for investors.

How do I change my strike price once the trade has been placed already?
Learn how the strike prices for call and put options work, and understand how different types of options can be exercised ... Read Answer >> 
Does the seller (the writer) of an option determine the details of the option contract?
The quick answer is yes and no. It all depends on where the option is traded. An option contract is an agreement between ... Read Answer >> 
How can derivatives be used to earn income?
Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered ... Read Answer >> 
When is a put option considered to be 'in the money?'
Learn about put options, how these financial derivatives work, and when put options are considered to be in the money related ... Read Answer >> 
Why are options very active when they are at the money?
Stock options, whether they are put or call options, can become very active when they are at the money. In the money options ... Read Answer >>