Yield based option – an interest rate option that allows the holder to receive the in the money amount in cash upon exercise or expiration.
Applying "Yield Based Option" to Securities Exams:
Sophisticated investors who want to speculate on the direction of interest rates may buy and sell yield based puts and calls. These types of interest rate options are based on treasury bills that have not yet been issued. As a result the options do not settle with the delivery of an underlying security and settle in cash