Down-and-in put
Definition · Level 10 · Derivatives pricing
Keep reading with Tradecraft
Without an account, you can read three definitions every 30 days. Tradecraft explains all 738 terms and strategies, with the lessons that teach them, flashcards that come back before you forget, quizzes and a payoff lab.
Put that exists only if the underlying falls through a lower barrier; the option investors sell inside autocallables and barrier reverse convertibles.
Example
100% strike, 60% barrier on SX5E: once 60% has traded, it pays 100 minus the final level if that is below 100.
Where Tradecraft teaches it
Level 10 · Derivatives pricing, in the lesson “Digitals & barrier options”: Price and hedge binaries with call spreads, and decompose knock-ins and knock-outs.
Related terms
- Call-spread overhedgeReplicating a short binary call with 1/ε lots of the (K − ε)/K call spread, so the hedge always pays at least the binary; its cost is built into the…
- Digital optionBinary payoff: a fixed amount if the underlying finishes beyond the strike, nothing otherwise.
- In-out parityKnock-in + knock-out with the same strike, barrier and expiry = the vanilla (ignoring rebates), so each costs less than the vanilla.
- Knock-inBarrier option that only comes alive if the underlying touches the barrier before expiry.
- Knock-outBarrier option that dies if the underlying touches the barrier before expiry, sometimes paying a small rebate.
- One-touchPays a fixed amount if a level trades at any time before expiry; with small drift and continuous monitoring, worth roughly twice the matching…