An option which pays the holder the difference between the price return of two different assets such as a pair of different shares, equity baskets, stock indexes, bonds, etc. For instance, an investor who expects that the tech sector will outperform the industrial sector can buy an outperformance call option that confers on him the right, without the obligation, to benefit from the relative performance between the two sectors. If the tech sector does better than the industrial sector, the investor will exercise the call option, and whereby earn the difference between the two returns. The investor may also exercise the option even when the tech sector declines, insomuch as its slide is not as large as that of its counterpart.

A relative performance option may also take the form of an option giving the buyer the right to the return of a single asset chosen from a class of assets (basket of two or more assets). This return can either be achieved through cash settlement or by physical delivery. The asset selected may be the best- or worst-performing of the assets in the basket, with its performance being measured against a relevant benchmark.