Barrier option definition
Barrier option definition
A barrier option is a type of options contract which has a payoff dependent on whether or not the market reaches – or exceeds – a predetermined price, known as a barrier level.
There are a few types of Barrier Options, including:
- Knockout Barrier Options – which expire worthless if the underlying reaches a certain price
- Knock-In Barrier Options – which have no value until a certain price is reached, at which point the option comes into existence until it expires
- No-Touch Barrier Options – the seller ifpayout depends on whether the strike price is not 'touched' by the market price before expiry
- Double-No-Touch Barrier Options – the buyer receives a payout if the price remains within two specified boundaries until expiry
- Window Barrier Options – where the barrier strike is only active for a specific period during the option's duration
Want to learn more about Knockout Options ?
What is a Barrier FX Option?
A Barrier FX Option is an agreement between a buyer and seller to exchange currencies via an options contract that’s dependent on a specified pre-agreed FX barrier level being reached – in the case of Knock-In Options – or not reached, in the case of Knockouts.