What is an As-You-Like-It Option
An as-you-like it option is a type of exotic option that allows the holder to choose whether the option is a call or a put within a specified time limit. As-you-like-it options are also known as call-or-put options, pay-now-choose-later options, or chooser options.
Breaking Down the As-You-Like-It Option
As-you-like-it options are more complex than plain vanilla options because the trader can choose to have the option be either a call or put. This is beneficial if the buyer thinks the underlying asset will have a large move, but is unsure which direction it will go. If the underlying has a large move to the upside they can choose the call option, or if the underlying has a large drop they can choose the put option.
With an as-you-like-it option, the option holder has a fixed period of time during which the option can be categorized as either a put option or a call option.
Because of the flexibility of these options, the premium paid for them is larger than the premium paid on an individual call or put, but may be less than buying both a call and put (a straddle).
These types of options are likely to be traded over-the-counter (OTC) and not on major options exchanges.
As-you-like-it options come in two styles: simple and complex. In the simple version, the holder chooses either a vanilla call or a vanilla put with the same strike price and expiration date. In the complex version, the strike prices or expiration dates of the call and put may be different.
As-You-Like-It Option Profit Calculation
Determining the profitability of this type of option is the same as calculating the profit for a vanilla call or put, since that is all a chooser option ends up being.
If the price of the underlying is above the strike price, the profit for exercising the call is the underlying's price, minus the strike price, less the premium paid for the option. This dollar amount is multiplied by the number of shares the option(s) control.
If the price of the underlying is below the strike price, the profit for exercising the put is the strike price, minus the underlying's price, less the premium paid. As with the call, this is multiplied by the number of shares the underlying option(s) control.