These positions operate like a binary return derivative but are so flexible I think you will love them too. Knocks Out are a new kind of spread-bet with a lot to offer. As a spread-bet they are an option, based on the spot price of the underlying asset. Profit or loss is based on the number of points or pips the assets price moves before you close the position. Unlike traditional spread-bets, Knock Outs have automatic trigger points for profits and losses that make them a little binary in nature.

Unlike binary options Knock Outs have extended expiry length, can be opened or closed at any time, have an option premium to affect the price, and are affected by dividends.

When you open the IG platform for spread-betting you will see options for traditional Spread-bets and Knock Out spread-bets. Unlike traditional spread-bets which are bought for long bullish positions or sold for short bearish positions Knock Outs are only bought.

You buy a Bull Knock Out if you think the assets price will move up, you buy a Bear Knock Out if you think the assets price will move down.

When you are purchasing your Knock Out you get to pick from a list of possible knock out levels. These levels are your risk, the farther away from the assets price at time of purchase the larger the risk or possible loss.

This level is the price at which your trade will be counted as an automatic loss and is, in effect, a stop-loss order. The good news is that your position may begin to show profits immediately.

Because the Knock Out is a regulated spread bet you can close it at any time you choose to lock in profits when you see them. You may also buy and sell the same asset repeatedly in order to capture small price movements over and over again.

The concept may quickly spread to other brokers, particularly as they are similar to binary options, but avoid the ESMA ban for EU traders. Here we explain what knock outs are, how pricing and premiums work and how traditional option greeks, vega and delta, still apply, with an example.

Knock Outs are a new product from IG Group and I think I already love them. These positions operate like a binary return derivative but are so flexible I think you will love them too. Knocks Out are a new kind of spread-bet with a lot to offer.

As a spread-bet they are an option, based on the spot price of the underlying asset. Profit or loss is based on the number of points or pips the assets price moves before you close the position.

Unlike traditional spread-bets, Knock Outs have automatic trigger points for profits and losses that make them a little binary in nature. Unlike binary options Knock Outs have extended expiry length, can be opened or closed at any time, have an option premium to affect the price, and are affected by dividends. When you open the IG platform for spread-betting you will see options for traditional Spread-bets and Knock Out spread-bets. Unlike traditional spread-bets which are bought for long bullish positions or sold for short bearish positions Knock Outs are only bought.

You buy a Bull Knock Out if you think the assets price will move up, you buy a Bear Knock Out if you think the assets price will move down. When you are purchasing your Knock Out you get to pick from a list of possible knock out levels. These levels are your risk, the farther away from the assets price at time of purchase the larger the risk or possible loss.

This level is the price at which your trade will be counted as an automatic loss and is, in effect, a stop-loss order.

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Connect and share knowledge within a single location that is structured and easy to search. That is:. However I am doubtful about it since I can't find this way of doing it in any place.

Is there a mistake in it? If you go short a knock-in call on the upper barrier and at the same time go long a knock-out call on the lower barrier, you basically replicate the lower barrier in the double barrier option scenario. But if your long short portfolio hits the upper barrier, profit is locked in at a constant level similiar to a bull spread.

On the contrary if the upper barrier is hit by the spot in a double barrier option, the option is completely extinguished without profit.

Following Espen's great book "The complete guide to option pricing formulas", we discover in chapter 4. Valuation can be carried out in the way described in the book. I cannot comment on answer of Gordon, hence comment here. Sign up to join this community. The best answers are voted up and rise to the top. Stack Overflow for Teams — Start collaborating and sharing organizational knowledge.

Create a free Team Why Teams? Learn more about Teams. Double knockout binary pricing? Ask Question. Asked 4 years, 9 months ago. Modified 1 year, 5 months ago. Viewed times.

Much help appreciated. option-pricing valuation binary-options barrier dependence. Improve this question. edited Feb 11, at LocalVolatility 5, 4 4 gold badges 18 18 silver badges 35 35 bronze badges. asked Feb 11, at Aldo Shumway Aldo Shumway 2 2 silver badges 11 11 bronze badges.

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Improve this answer. answered Feb 12, at Gordon Gordon edited Feb 12, at Aldo Shumway 2 2 silver badges 11 11 bronze badges. answered Feb 11, at Fugazi Fugazi 71 5 5 bronze badges.

However I was asking for the mistake in what I was doing which it's clear once one considers a path that breaches both barriers as it was mentioned in the comments. edited Jun 7, at answered Jun 5, at Nikolai Zaitsev Nikolai Zaitsev 11 3 3 bronze badges. Sign up or log in Sign up using Google. Sign up using Facebook.

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A binary option is a type of option with a fixed payout in which you predict the outcome from two possible results. But in case you know what you are doing and are confident in yourself read the full description of the strategy! Sign up using Facebook. Stack Gives Back to Open Source When the index goes ex-dividend when owners are locked into their payments the price of the index will fall.

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