A series of
forward start options in which the first
option is active (and its
strike price is set) immediately. The second option becomes active on the
expiration date of the first option, with the strike set as the
market value of the
underlying on that day. The process continues for as many options as exist in the cliquet. Importantly, the entire
premium is paid at once. Cliquets are useful for an
investor who wants to lock in an option for a significant period of time, with the strike price adjusting to reflect market realities. It is also known as a reset option or a ratchet option.