Knock-In Option (redirected from Knock In Option)

Knock-In Option

An option contract that becomes active only when a certain price is reached. For example, one may purchase a knock-in option with a "knock-in price" of $35 and a strike price of $45. If the price of the underlying asset never reaches $35 at any point over the course of the option's life, the option is treated as if it never existed in the first place. If it does, however, it becomes a plain vanilla option (that is, a regular option) with a strike price of $45. See also: Up-and-In Option, Down-and-In Option, Knock-Out Option.

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Knock-In Option

What Does Knock-In Option Mean?

A latent option contract that begins to function as a normal option (“knocks in”) only after a certain price level is reached before expiration.

Investopedia explains Knock-In Option

Technically, this type of contract is not an option until a certain price is met, and so if the price is never reached, it is as if the contract never existed. Knock-ins are a type of barrier option that may be either a down-and-in option or an up-and-in option.

Related Terms:
• Derivative
• Expiration Date
• Plain Vanilla
• Stock Option
• Triple Witching