When you have enough money, it's the ability to spend the rest of your life hanging out on a beach in Bermuda.
It's also the name of a position you can take in the options market. Bermuda options combine aspects of so-called American and European options (See: Atlantic Spread). Where else would Europeans and Americans choose to meet each other except Bermuda? (Rio perhaps? L.A.? Certainly not Greenland...)
In brief, a European option can be exercised only on a specific, pre-set date. Meanwhile, an American option can be exercised at any time before its set expiration. A Bermuda option has multiple potential exercise points, though they come at regular intervals.
Think of a European option as driving a car down a straight road that only goes between two points, like a remote desert highway ("cool wind in my hair/warm smell of colitas, rising up through the air"). Meanwhile, an American option is like having an all-terrain vehicle on the same highway. You can't go beyond the final destination, but you can get off the road any time, at any place ("you can check out any time you like/but you can never leave").
Now, a Bermuda option is like a driving on a highway with regular off ramps (no "Hotel California" lyrics really fit here, so we'll just say "so I called up the captain/'please bring me my wine'" just because it's fun to order wine). You can't go offroading anywhere you want, but you have choices as to when/where you leave the road.
Related or Semi-related Video
Finance: What Is a Call Option?25 Views
finance a la shmoop. what is a call option? option? option, where are you? okay
yeah yeah. not phone options, call options. and a close but no cigar. a call option [man smokes in a tub of cash]
is the right to call or buy a security. the concept is easy the math is hard.
you think Coca Cola's poised for a breakout as they go into the new low
calorie beverage business. their stock is at 50 bucks a share and you can buy a [man stands on a stage as crowd cheers]
call option for $1. well that call option buys you the right
to then buy coke stock at 55 bucks a share anytime you want in the next
hundred and 20 days. so let's say Coke announces its new sugarless drink flavor
zero it's two weeks later and the stock skyrockets to fifty eight dollars a
share. you've already paid the dollar for the option now you have to exercise it. [man lifts weights]
so you buy the stock and you're all in now for fifty five dollars plus one or
fifty six bucks a share and your total value is now fifty eight bucks. well you
could turn around today and sell the bundle that moment, and you'll have
turned your dollar into two dollars of profit really fast. and obviously had the [equation on screen]
stock not skyrocketed so quickly well you would have lost everything. still you
lucked out and now you're sitting on some serious cash, courtesy of your call [two men in a tub of cash]
options. as for Coke flavor zero turned out to be nothing more than canned water.
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