Knock-Out Options are an innovative new way to trade your favorite assets. These options, which expire worthless if the underlying asset's price exceeds or falls below a specified price, can be used to hedge and manage risks. The knock-out option gives you the right but not the obligation to enter into a contract of a certain size at a fixed premium with an expiry date.Knock-out options are a type of barrier option, which expire worthless if the underlying asset's price exceeds or falls below a specified price. The most common way for an OTM knock-out option to become in-the-money is for the asset price to exceed/fall below its strike price by some predetermined amount (say $0.25).These are similar to long-dated futures and are used by traders seeking to limit losses on their positions, as well as for speculation.They are also known as knock-in options since they can only be profitable when the underlying asset's price is above (or below) the strike price on expiration.
