up-and-out option(redirected from Up and Out Option)
An option contract that expires worthless automatically, even before the expiration date, if the price of the underlying asset exceeds a certain stated amount. For example, one may purchase an up-and-out option with a "knock-out price" of $45 and a strike price of $35. If the price of the underlying asset reaches $45 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 not exceed this price, it remains a plain vanilla option (that is, a regular option) with a strike price of $35. It is a type of knock-out option. See also: Up-and-in option, Down-and-in option, Down-and-out option, Knock-in option.
An option that terminates when the value of the underlying asset reaches a specified value.