Up-and-Out Call Option

Up-and-Out Call Option: The Highwire Act

Cheapen Right to buy when a modest rise expected but not a leap, walking a fine line between profit and knockout.

i. Select Desired Direction [UP/DOWN]

ii. Will (WETH) move ‘a lot’? ( ‘Knock IN’ )

Will (WETH) move ‘not too much’? ( ‘Knock OUT’ )

iii. [UP/DOWN] [Knocks In ( effective ) / Knocks Out ( extinguished )] if (WETH) @ Expiry beyond barrier.

+ / UP / OUT

Buy UP and OUT and pay premium if you think ETH @ Expiry UP from <strike price> and INside ( < ) <barrier>; if NOT, premium lost.

- / UP / OUT

Sell UP and OUT and earn premium if you think ETH @ Expiry NOT UP from <strike price> or NOT INside ( > ) <barrier>; if NOT, pay ETH - strike

Up-And-Out Call Option Contract

An Up-And-Out Call Option Contract ) is a contract that gives the buyer (the owner or holder of the contract) the right to buy the Underlying Currency at the specified Strike Price upon exercise of the contract, if the Reference Price is below the Barrier Level. The contract seller has the corresponding obligation to sell the Underlying at the specified Strike Price if the Reference Price is below the Barrier level upon exercise of the contract

UaO CK, B

Up-and-out call option with strike K and knock-out if ST ≥ B at expiry

Payout at expiry =

If ST < B: max(ST - K, O)

If ST ≥ B: zero

Eg. Payout of an up-and-out call option on eth/$ with K=100, B=115