Floortion

It sounds like something a physicist might try to replicate in a lab, but a floortion is actually something that can help us sorta kinda hedge our bets in certain financial markets.

All investments carry some type of risk. But we can try to mitigate some of that risk by (instead of buying or selling actual options) buying or selling options on options. It’s like saying, “We’re not sure we want this thing, but if its price changes and meets these conditions here, then we might want to buy it.”

A floortion is one of those option options; basically, we buy (or sell) the right to buy (or sell) an option if it hits a certain low price, or price floor. We don’t have to buy/sell it, but we have the right to buy/sell it. And if it goes below that price floor, we get a little payout.

Floortions come with a predetermined date range; if the option doesn’t decrease to or beyond our chosen strike price by, say, December 1, then we could forfeit the right to exercise it.