High Quality Content by WIKIPEDIA articles! Rainbow option is a derivative exposed to two or more sources of uncertainty, as opposed to a simple option that is exposed to one source of uncertainty, such as the price of underlying asset. Rainbow options are usually calls or puts on the best or worst of n underlying assets, or options which pay the best or worst of n assets. The number of assets underlying the option is called the number of colours of the rainbow. The options are often considered a correlation trade since the value of the option is sensitive to the correlation between the various basket components.