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The latest markets news, real time quotes, financials and more. Asian options are also known as average options. 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. They are constructed by tweaking ordinary options in minor ways. 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. 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 30-day period for sampling the data. 22, where the averaging is based on the value of the stock after each 30-day period. The profit is the average minus the strike price 22. 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. Learn how to use FOREX options for profit and hedging. Before learning about exotic options, you need a fairly good understanding of regular options.
How do I change my strike price once the trade has been placed already? How Do Speculators Profit From Options? Options are a risky game, but you can learn speculators’ tricks to use them to your advantage. How can derivatives be used to earn income? What’s Required for a Stock to Trade as an Option?