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What is a step up option?

Updated: 12/17/2022
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11y ago

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A Step-Up Option is a type of derivative in which the option's strike price resets when knocked in. For example, a long, at-the-money step-up put on a market with a spot price of 100 could have a reset strike every 10 points. When the market hits 110 your strike price steps up to 110.

This will make this put more expensive than a plain vanilla put since your protection level is raised as the market moves away from your original level.

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