Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Russian Option

What it is:

A Russian option is a type of lookback option which does not have an expiration date.

How it works (Example):

As a lookback option, a Russian option may be exercised according to American or mid-Atlantic settlement rules based on the underlying security's most profitable market price during the life of the option. Russian options differ from other lookback options in that they do not comprise an expiration date.

Why it Matters:

Without an expiration date, a Russian option gives the holder the freedom to exercise when he feels the underlying security has reached the most beneficial level regardless of how short or how long the holding period. In this respect, Russian options are recommended for seasoned investors due to the potential for high risk if held over long periods of time.