Barrier Options

These are typically traded in an OTC (Over The Counter) market and are popular with Forex traders. The four types of Barrier Options are as follows:

  • Up-and-In, these activate if the traded asset (spot price) moves up and above a specific price.
  • Up-and-Out, these options deactivate if the asset moves up and above a specific price.
  • Down-and-In these are activated if the traded asset moves down and under a specific price.
  • Down-and-out these deactivate if the asset in question moves under a specific price.

So basically Barrier options are activated if a specific minimum or maximum price level is hit by the underlying asset. The barrier option becomes activated if the underlying spot price hits a predetermined level which is known as the “Barrier”.