Investor Glossary-knock-in optionInvestor Glossary-knock-in optionInvestor Glossary-knock-in optionInvestor Glossary-knock-in optionInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Knock-In Option

The HTML to link to this page
 

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...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. 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: FICO score, dividends payable, VIX, average price per share, deferred tax, inflation, liquidity ratio, 144a, in escrow, per diem, command economy, annual return, open position, quality assurance, labor relations, stock market close, retained earnings, FTSE, Zero Cost Collar, diluted share, deferred revenue, debt service coverage, irrevocable trust, LIBOR, implied volatility, 401a, risk management, current ratio, 1035 exchange, option premium, EBITDA, Key Rate Duration, minority interest, wholly-owned subsidiary, required rate of return, cancelled check, real GDP, reverse mortgage, ex-dividend date, margin rate, APR, covered put, stock split, ex-dividend, class C shares, limit order, 1031 exchange, phantom income, balance sheet


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use