Gap Put Option
Computes the price of a gap put, where the strike that triggers exercise differs from the strike that sets the payoff. The option pays (K1 − S) when the price falls below K2, creating a jump in the payoff exactly at K2. It's the downside version of the gap option, the theoretical basis of many discontinuous-payoff contracts. Enter the spot price, the payment strike, the trigger strike, the rate, the volatility and the term.
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Gap Put Option
Computes the price of a gap put, where the strike that triggers exercise differs from the strike that sets the payoff. The option pays (K1 − S) when the price falls below K2, creating a jump in the payoff exactly at K2. It's the downside version of the gap option, the theoretical basis of many discontinuous-payoff contracts. Enter the spot price, the payment strike, the trigger strike, the rate, the volatility and the term.
The put with trigger and payment separated
Just as in the gap call, the gap put separates two functions that normally live at the same strike. One strike, the trigger, decides whether the option pays; another, the payment strike, computes the value. The put pays (K1 − S) when the price falls below the trigger K2, and that difference creates a jump in the payoff diagram right at the trigger level.
The effect mirrors the gap call: depending on where the payment strike sits relative to the trigger, the option can start paying with a positive or even negative value the instant it crosses the trigger. The math is almost identical to Black-Scholes, with the trigger K2 entering the d1 and d2 terms and the payment K1 only in the cash term.
Enter the spot price, the payment strike, the trigger strike, the interest rate, the volatility and the term. The tool returns the gap put premium. When the two strikes coincide, it becomes a plain put, a good way to check the calculation.
Related Tools
Gap Option
Computes the price of a gap call, where the strike that triggers exercise differs from the strike that sets the payoff. The option pays (S − K1) when the price exceeds K2, and that separation creates a jump (gap) in the payoff exactly at K2: the option can start paying with a positive or negative value. It's the theoretical basis of many discontinuous-payoff options. Enter the spot price, the payment strike, the trigger strike, the rate, the volatility and the term.
Contingent-Premium Put Option
Computes the fair premium of a contingent-premium (pay-later) put option. As in the call version, the buyer pays only at expiry and only if the put finishes in the money. It's an attractive structure for those wanting protection with no upfront outlay, at the cost of a higher premium if the insurance is actually triggered. The price comes from the Black-Scholes put value divided by the exercise probability. Enter price, strike, rate, dividend, volatility and term.
Cash-or-Nothing Put
Computes the price of a cash-or-nothing put: it pays a fixed amount if the asset finishes below the strike, and nothing otherwise. It's the downside version of the digital option, the complement of the cash-or-nothing call. The price is the payout discounted and multiplied by the risk-neutral probability of the asset finishing below the strike, Q·e^(−rT)·N(−d2). Enter the spot price, the strike, the interest rate, the term, the volatility and the payout.
The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.