In one type of a lookback option,
A) You can decide to change the option from a call to a put or vice versa at the last minute.
B) You can take any observed price prior to maturity as the strike of the option.
C) You can take the average observed price of the underlying in determining the option payoff.
D) The initial price of the underlying acts as the strike price of the option.

Question

Quizplus · Accepted Answer

Lookback options allow the holder to "look back" over time to determine the payoff, specifically by taking any observed price of the underlying asset prior to maturity as the strike price. This feature ensures that the holder can maximize their payoff by selecting the most favorable price during the option's life.

In One Type of a Lookback Option