   
|
|
|
|
|
|
| |
A knock-in option or "trigger" option is a type of barrier option that is latent and only begins to function as a normal option once a certain price level is reached before expiration. A knock-in option might not knock in at all. A knock-in option is typically a currency or commodity option. For a knock-in option, the knock-in option writer sets the limit hoping to restrict losses if there is a sharp price move. Higher implied volatilities suggest a greater probability of triggering the barrier and knocking in the knock-in option. A knock-in option seller removes some of the price exposure and buyer pays less for a knock-in option because it offers only limited profit opportunity. Any barrier options, including a knock-in option, is activated or de-activated once the price of the underlying financial instrument reaches a set level. The opposite of a knock-in option is a knock-out option. Knock-in option investments are suitable for investors with strong directional views or premium constraints.
Rate this Knock-In Option definition...
|
|
|
|
 |
Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day. |
|
Popular Terms: in escrow, stock split, deferred revenue, implied volatility, cancelled check, FICO score, wholly-owned subsidiary, required rate of return, phantom income, 401a, risk management, average price per share, annual return, margin rate, 144a, ex-dividend, 1031 exchange, ex-dividend date, class C shares, covered put, liquidity ratio, retained earnings, debt service coverage, VIX, current ratio, open position, diluted share, option premium, balance sheet, limit order, deferred tax, inflation, reverse mortgage, 1035 exchange, FTSE, LIBOR, per diem, dividends payable, stock market close, irrevocable trust, Key Rate Duration, APR, real GDP, EBITDA, minority interest, labor relations, Zero Cost Collar, quality assurance, command economy
|
|
| |
