Himalayan Option

In option trading, the normal, boring, vanilla positions you can take are called calls and puts. Calls are bets that an underlying asset (like a stock, bond, or commodity) will go up in price. Puts are bets that the underlying asset will go down. Calls and puts are the equivalent of a date that involves dinner and a movie, with everyone asleep in their own beds by 11.

In contrast, exotic options are the kinds of dates that last for days, include foreign travel, involve multiple blackouts, and possibly feature additional participants.

One category of exotic options are called the mountain range options. These involve a series of strategies, each named after a mountain range, or a mountain-themed term (Everest, Annapurna, etc.). Instead of being based on a single underlying asset, like the vanilla options, the mountain range options involve a basket of underlying securities. Multiple participants, as it were.

A Himalayan option is one of these mountain range strategies. It's set up with multiple payout dates. On each date, the option pays off based on the best performing asset in the basket of underlying assets. The asset then gets pulled from the basket and another cycle takes place. Each period resolves based on the highest performing remaining asset, which is then removed, until just one asset remains.