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Derivatives

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  • August 7, 2021
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Knock-In Option

An option that automatically activates or comes into life only when a certain price of its underlying is hit. For example, an investor may purchase a knock-in option to buy a share of stock for a strike price of 10 dollars which knocks in at 15 dollars. If the stock price doesn’t reach 15 dollars over the life of the option, the option will be considered as if never existed in origin. But if the stock price reaches the knock-in price, the option activates and is then an ordinary option with a strike price of 10 dollars.


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