knock-out option

(redirected from Knockout Option)

Knock-out option

An option that- is worthless at expiration if the underlying commodity or currency price reaches a specific price level.

Knock-Out Option

An option contract that automatically expires, even before the expiration date, if the underlying asset reaches a certain price that would be disadvantageous to the option writer. If this price (called the knock-out) is reached, the option becomes worthless. Most of the time, the knock-out results in the holder losing the premium, though some knock-out options, known as rebate barrier options, refund part of it. See also: Barrier option.

knock-out option

An option that loses its entire value in the event the underlying asset crosses a predetermined price level.
References in periodicals archive ?
Their iffy formulas carry nicknames like "wedding band," "mambo combo" and "knockout option." They amount to huge bets stacked against the bettor, often with both buyer and seller inclined to cover losses with bigger bets until everything comes crashing down.