Research: new option type "Chameleon option" :-)

[thecoder]

I just had a very funny idea (ie. a blitz idea ) of a possible new option type with these characteristics:

A "Chameleon Option" or "Bi-Option" or "CALLPUT option" or "PUTCALL option" or "Combi-Option" :-) :

Payoff:
  if S_t >= K then
    like a CALL
  else
    like a PUT (or FairPUT)

Can this mathematically work/function at all?
It makes profit if S_t > (K + premium) OR if S_t < (K - premium), else makes (some or full) loss, obviously.

 

[vegamedic]

so....a straddle?

 

[thecoder]

so....a straddle?

Yeah, indeed, it's the same.
But I was (maybe naively) thinking of using just one premium, ie. half the premium of the straddle, but with same payoff...

 

[destriero]

The closest thing would be an OTC straddled lookback. You're still an idiot.

 

[thecoder]

destriero wrote:

The closest thing would be a straddled lookback. You're still an idiot.

A "straddled lookback", what an idiotic term by an idiot!

 

[destriero]

Here, cuck:

https://en.wikipedia.org/wiki/Lookback_option

 

[thecoder]

Dumbo @destriero,
FYI: it has nothing to do with "Lookback options", it's rather a plain vanilla "synthetic" straddle; it just combines both legs in just one.

 

[thecoder]

IMO, one still can make this to a product, as it saves the trader a leg (outch!... )
But it then of course cannot be divided anymore, unlike with the real stradde where one can close one leg independent of the other leg.

I think I can compute a fair premium for this new option type. If that new premium is different from C+P, then it indeed is a new product!
Just an idea, must research....

 

[destriero]

"like a call" so what happens to the call when spot trades below the strike? So there is no KO, but what is the extrinsic value of the call?

A synthetic straddle involves spot. You're still an idiot and you don't know what a straddle involves so you call it a chameleon.

You're too stupid to debate. i am putting you on ultrablock.

 

[thecoder]

Dumbo @destriero,
the few lines of code snippet explains it, but of course if you don't understand even that, then of course you can't understand what real men are talking about...
Just piss off into your den, and don't disturb the experts anymore with your idiocy.