Asian Option
This is an exotic option that is based on the average value of an underlying asset as opposed to the current price (spot price) at the time you buy or sell an asset. The dates of actual valuation (when prices are recorded for averaging purposes) would be laid out in your contract (hint: you should read it).
Generally, Asian options will be less expensive than standard (American or European) options because averaging the prices of an underlying asset takes out the upside of volatility. In other words, you’re missing out on the benefit of a big climb or drop in price because you’re stuck with the average of a whole bunch of prices.
Of course, this is a good thing if you want to avoid potential financial losses due to the one-stop-shop spot price. Asian options are also helpful if you’re worried about volatility, or if there’s a reason the price of an asset could drastically change.
Related or Semi-related Video
Finance: What is Intrinsic Value (of An ...6 Views
Finance allah shmoop what is the intrinsic value of an
option All right this is brandi She owns a twelve
dollars strike price call option toe buy a share of
my fifteen minutes are up dot com a retirement home
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Well the stock is trading for fifteen bucks a share
of this moment Her strike price is twelve so the
intrinsic value of that option is fifteen minutes twelve or
three bucks that is it is three dollars in the
money and if brandy converted it into a share this
moment and then immediately sold the stock for fifteen dollars
in cash well she'd make three bucks But there's a
catch per call option doesn't expire for five weeks so
that three dollars in the money is actually worth more
than three dollars because she has data or time yet
to exercise and convert or just sell the option itself
So it's worth mohr because well a stock might go
up from fifteen dollars in overtime Stocks go up so
in the next five weeks well couldn't go up a
dime twenty cents twenty five cents and make that three
Dollars worth three ten three twenty three Twenty five Sure
sure it could happen So yeah that's The difference between
actual value and intrinsic value You get seita kickers in
there making the option's worth more than just converting them
into stock and selling them right there And yeah it
looks like our one and a half minutes are up
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