Chooser Option

An option where the investor has the opportunity to choose whether the option is a put or call at a certain point in time during the life of the option. The underlying options are assumed to be European options on the same asset. At the expiry date of the chooser option, it is assumed that a rational holder of the chooser option will choose the more valuable of the put or call option. In doing so, the less valuable option, not chosen, will die.