Chooser Option refers to a path dependent option that can be bought by paying up-front premium. Terminal Value of this Chooser Option depends on the path of the underlier for the whole life of the option. Chooser Option refers to an option, which can be purchased by paying up-front premium.
This Chooser Option is a path dependent option. This means, that, the terminal value of Chooser Option depends on the value of the underlier. This dependence remains present at all prior points of time. So, in this way, over the life of the option, the terminal value of Chooser Option depends on the path of the underlier.
In case of Chooser Option, the person can choose the derivative as a vanilla put option or call option. But, the person is required to make the choice in a fixed period of time. It is very obvious that, the chooser feature of the Chooser Option, increasingly gains value with longer choice period.
In Chooser Option, whatever is the alternative chosen by the person, call or put, each of them are generally associated with a single expiration date. In the similar way, both the alternatives usually carry a single strike price.
By strike price of a call option, we mean the contractual price at which the underlier will be bought, in the event of option exercise.
Strike price of a put option refers to the contractual price at which the underlier will be sold, in the event, when the option is exercised.
According to Rubenstein, there are some Chooser Options, which offer call or put option with different expiration dates and different strike prices.