Chooser option

In finance, a chooser option is a special type of option contract. It gives the purchaser a fixed period to decide whether the derivative will be a European call or put option.

In more detail, a chooser option has a specified decision time t 1 , where the buyer has to make the decision described above. Finally, at the expiration time t 2 the option expires. If the buyer has chosen that it should be a call option, the payout is m a x ( S − K , 0 ) . For the choice of a put option, the payout is m a x ( K − S , 0 ) . Here K is the strike price of the option and S is the stock price at expiry.