down-and-in option

Down-and-In Option

A form of a knock-in option whose payoff is determined by the price of the underlying asset sinking to the barrier price level.

Notes:

If the underlying asset does reach the barrier price level, the down-and-in option becomes a vanilla European call or put option. If the underlying asset price does not reach the barrier level, the option expires worthless. Investors may choose a down-and-in option rather than directly purchasing the vanilla option, as option premiums tend to be significantly lower for knock-in options.

See also: Barrier Option, Down-and-Out Option, European Option, Knock-in Option, Option, Vanilla Option

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Down-and-in option

Barrier option (or knock-in option) that causes a plain-vanilla call or put option to come into existence if the underlying asset price falls to a predetermined price level (the barrier price).

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down-and-in option

An option that is created when the value of the underlying asset falls to a predetermined level. Compare down-and-out option.