Knock-In Option

DEFINITION of 'Knock-In Option'

A latent option contract that begins to function as a normal option ("knocks in") only once a certain price level is reached before expiration.

BREAKING DOWN 'Knock-In Option'

Technically, this type of contract is not an option until a certain price is met, so if the price is never reached it is as if the contract never existed. Knock-ins are a type of barrier option that may be either down-and-in option or an up-and-in option.

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