Which one of the following four statements correctly defines chooser options?

Which one of the following four statements correctly defines chooser options?
A . The owner of these options decides if the option is a call or put option only when a predetermined date is reached.
B . These options represent a variation of the plain vanilla option where the underlying asset is a basket of currencies.
C . These options pay an amount equal to the power of the value of the underlying asset above the strike price.
D . These options give the holder the right to exchange one asset for another.

View Answer

Answer: A

Explanation:

Chooser options give the holder the flexibility to decide whether the option will be a call or a put at a specific future date. This feature makes chooser options valuable in uncertain market conditions, as the holder can choose the type of option that will be more beneficial depending on the market scenario at the decision point.