Up-and-Out Barrier Call
Computes the price of an up-and-out barrier call: an option that ceases to exist if the asset touches a barrier above the current price before expiry. It's a curious case — the option is a bet on the upside, but it dies if the price rises too far, which makes it cheap when the barrier is close. The Reiner-Rubinstein formula holds for a barrier above the strike. Enter the spot price, the strike, the barrier, the rate, the term and the volatility.
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Up-and-Out Barrier Call
Computes the price of an up-and-out barrier call: an option that ceases to exist if the asset touches a barrier above the current price before expiry. It's a curious case — the option is a bet on the upside, but it dies if the price rises too far, which makes it cheap when the barrier is close. The Reiner-Rubinstein formula holds for a barrier above the strike. Enter the spot price, the strike, the barrier, the rate, the term and the volatility.
Betting on the upside, but not too much
The up-and-out call has a contradictory personality. It's a bet on the asset rising, but with a limit: if the price rises too far and touches a barrier above the current level, the option dies on the spot and pays nothing. It's like rooting for your team to win, but not to blow out the opponent, on pain of losing the bet.
Because of that risk of being knocked out precisely when things were going well, the up-and-out costs far less than a plain call, especially when the barrier is close to the price. It's the option for someone expecting a moderate, well-behaved rise, willing to give up the runaway scenarios in exchange for a smaller premium.
Enter the spot price, the strike, the barrier (above spot), the interest rate, the term and the volatility. The tool uses the Reiner-Rubinstein formula and returns the up-and-out call premium. The closer the barrier is to the current price, the more likely the knock-out and the cheaper the option.
Related Tools
Down-and-In Barrier Call
Computes the price of a down-and-in barrier call: an option that only comes into existence if the asset touches a barrier below the current price before expiry. It's the counterpart of the down-and-out, and the sum of the two is exactly a plain call: either the barrier is touched (activating the in) or it isn't (keeping the out). Because it depends on a trigger, it costs less than a plain call. Enter the spot price, the strike, the barrier, the rate, the term and the volatility.
Up-and-In Barrier Option (Call)
Computes the price of an up-and-in barrier call option. It's a knock-in barrier option: it only comes to life if the asset price touches a barrier above the current level before expiry; if it never touches, it expires worthless, however deep in the money it might have been. Because of that extra condition, it costs less than a plain call. The pricing uses the Reiner-Rubinstein closed-form formulas. Enter price, strike, barrier, rate, dividend, volatility and term.
Down-and-Out Barrier Option (Put)
Computes the price of a down-and-out barrier put option. It's a knock-out barrier option: it works like a normal put, but is cancelled the moment the asset price touches a barrier below the current level. Because it disappears precisely when the put would be gaining the most value, it's usually worth much less than a plain put, making it cheaper for those betting on moderate declines. The pricing uses the Reiner-Rubinstein formulas. Enter price, strike, barrier, rate, dividend, volatility and term.
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.