This definition gets deep in the weeds in the options market. We'll try to keep it relatively simple, but here we go...
In options trading, there's a thing called mountain ranges. This is a nickname for a type of option that combines aspects of options for different underlying securities. There are a bunch of these, each of them operating in specific ways and each named after famous mountain ranges (or individual mountains) in the world: Annapurna, Everest, Himalayan, etc.
Among these mountain range options, there's the Altiplano variety. (The Altiplano is actually a plateau region in the Andes mountains, a range located in South America.) The Altiplano option starts with a standard option for some combination of underlying assets (say shares of different companies' stocks). On top of this is added a type of option that provides a pay out if the stocks don't get to their strike prices during the option period.
So the Altiplano basically combines an option betting that the assets will get to certain prices in a certain period of time with an option providing some insurance if the prices aren't reached.
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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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