A Lookback Option is the right tool to help manage your exposure to volatility. When a market is volatile and options are expensive, the lookback option provides a way to capture the value of an option without having to pay the full premium.A lookback option allows the holder to exercise an option at the most beneficial price of the underlying asset, over the life of the option. The option is exercisable only during a specified time period, and then expires. The lookback period is calculated based on the initial life of the option.For example, a lookback option with a 20 day life is exercisable when the underlying asset is above $90 and expires when below $70 (20/$90).The lookback option is a type of derivative. It is a contract that has the same payoff as paying for a call option, but gives the holder the right to require the seller to buy back the underlying asset at a pre-determined price. The value of this contract depends on the price of the underlying.
