A range option is a European-style, cash-settled option that has a payout if the value of the underlying interest falls within a specific range of values (the range length) at expiration.
As the underlying interest value increases throughout the range length, the amount of the payout (i.e., the cash settlement amount) of the range option increases linearly to a maximum value, remains constant at that value through the middle of the range length and then decreases linearly to zero as the value of the underlying continues to increase to the top of the range length.
