up-and-out option

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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.
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up-and-out option

An option that terminates when the value of the underlying asset reaches a specified value.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.