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   Exploding Option
   















 

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Exploding Option

(1) A collar or equity risk reversal structure in which the short option 'explodes' (expires), and the long option pays off at maximum value when the underlying trades through the outstrike price either instantaneously or as of the close of a trading session. See Barrier Option, Capped Index Options (CAPS) (diagrams), Path-Dependent Option, Cliquet Option (4) (diagram). (2) An out option. See Up-and-Out Call, Out Option, Kick-Out Option, Knock-Out Option, Cash-Out Call Option with Rebate, Cash-Out Put Option with Rebate, Touch Option, Up-and-Away Option, Vanishing Option.

Glossary * E