Switching options

Switching options

A sequence of transactions in which exercise of one option creates one or more additional options. Investment-disinvestment, entry-exit, expansion-contraction, and suspension-reactivation decisions are switching options.

Switching Option

An option, the exercise of which creates one or more options. The most basic example of this is a compound option, which is an option on an option. A reload stock option may also be a switching option. Switching options may be useful if an investor believes he/she can secure a lower (in the case of a call) or higher (in the case of a put) strike price.