An extended option that periodically settles and resets its strike price at the level of the underlying during the time of settlement.
Investopedia Says:
For example, a 3 year cliquet option with a strike of 1000 would expire worthless on the first year if the underlying was to be 900. This value would then be the new strike for the following year and should the underlying on settlement be 1200, the contract holder would receive a payout and the strike would reset to this new level. Higher volatility provides better conditions for investors to earn profits.
Also known as 'ratchet option' or 'cliquet option'.
Related Links:
An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them. Options Basics Tutorial
