Chameleon Option
Categories: Derivatives, Trading
So let’s start with the basics here first. An option is a contract that gives investors the right (but not the obligation) to buy or sell a certain amount of something at a fixed price within a certain period of time. (Insert crickets chirping). As an investor you have the option of selling (also called "writing") or buying these options.
Then there's more complex option strategies, like (we won't go into the details of these here) short straddles, long straddles, combinations, spreads...all sorts of stuff. Then there's the chameleon option.
Much like a real chameleon that changes its colors, a chameleon option’s structure can also change from its original form. For example, the put option (an option to sell) that you own automatically changes into a call option (an option to buy) after it reaches a certain price. So rather than selling, you're buying! It's a way to fine-tune your strategy for different contingencies.
