Cliquet Option

Categories: Options,

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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Definition / Meaning of

Stable Value Fund

Categories: Mutual Funds, Retirement and Pension,

1. An investment option typically offered in retirement plans by employers or IRAs that are composed of guaranteed investment contracts, fixed-income funds, or capital-preservation funds. This is a popular investment vehicle for individuals nearing retirement because of stable interest and principle payments on these contracts. The returns from a stable value fund are secure, but can be small compared to other investments. A stable value fund should not be the only investment vehicle in the portfolio of an individual who has a long time until retirement. 2. A type of mutual fund that is regulated by the Department of Labor instead of the securities and exchange commission, which typically oversees mutual funds. Stable value funds are similar to bond funds, but they have insurance against principal losses. Money invested in stable value fund is combined with other cash infusion and used to purchase secure contracts from banks or insurance companies. These contracts include a guaranteed regular rate of return over the course of the contract.

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Cliquet Option

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Stable Value Fund

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