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  • February 7, 2023
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Down-and-Out Barrier Option

A variant of a barrier option in which the right to exercise deactivates or becomes inactive if the actual “spot” price of the underlying turns to be below the specified barrier. With this option, the spot price of the underlying is set above that barrier. Therefore, having the ability to exercise the option depends on the price of the underlying closing above the barrier level. If the underlying price does not break through the barrier level, the option expires worthless.

It is also known as a down-and-out option.


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