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Down-and-In Option
What does it mean?
A form of a knock-in option whose payoff is determined by the price of the underlying asset sinking to the barrier price level.
In Other Words...
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.
Related Links
Options Basics Tutorial - An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them.
Related Terms
Barrier Option | Down-and-Out Option | European Option | Knock-in Option | Option | Vanilla Option
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