Basket Option

There are a lot of financial terms containing the word "basket." The common thread between them? Things are grouped together (duh).

For a basket option, the underlying asset would be a collection of assets, currencies, securities, etc. The holder is not obligated, but has the right to sell or purchase an asset at a particular price within a specified timeframe. An advantage to the basket option is that it's less expensive than multiple individual option transactions, since multiple assets are "basketed" together in one transaction.