Up-and-In Option
Categories: Company Management
An “up-and-in option” is a type of exotic barrier option. Not “exotic” like sandy beaches and drinks with umbrellas, but “exotic” like...complex, and pretty much only available to institutional investors.
Basically, an up-and-in option is an option that will only be exercised if the strike price reaches a certain level, or barrier.
For example, let’s say we buy an up-and-in option on Drink Umbrellas, Inc. stock, which is currently trading at $12.10. Our option has a $12.50 barrier that expires on September 30. If the strike price hits or goes above $12.50 on or before September 30, the option is exercised and we get paid. If it doesn’t, it isn’t, and um...we don’t.
