The
price at which a
barrier option becomes active or inactive. A
knock-in barrier option may not be
exercised unless the
price of the
underlying asset reaches the barrier price, which is stated in the contract. For example, a contract may have a
strike price of $35, but it may only be exercised if the
spot price of the underlying asset falls below $40 at some point during the life of the option. On the other hand, a
knock-out barrier option with a strike price of $35 may
expire automatically if the price rises above $40. In both cases, the barrier price is $40.