cliquet option

Definition

A type of option in which the strike price periodically resets before the final expiration date is reached. When the resetting date is reached, the option will expire worthless if the current price of the security is below the strike price, and the strike price will reset to this lower security price. If the resetting date is reached and the security is trading higher than the strike price, the investor will earn the difference and the strike price will reset to the higher security price. For example, a two-year cliquet stock option that resets annually could have a strike price of $500.
If the annual resetting date is reached and the stock is trading at $600, the investor receives a $100 payout and the strike price resets to $600. The name "cliquet" refers to the imaginary clicking sound made when the strike price is reset to a higher level. also called ratchet option.
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Clinton bond CLO