Knock-outs
A knock-out is a financial instrument that is designed to limit the amount of risk an investor can take on. It is a type of derivative that is used to protect against large losses. The knock-out is a type of option that has a predetermined price at which the option will expire. If the price of the underlying asset reaches the predetermined price, the option will expire and the investor will not be able to exercise the option. This type of option is often used by investors who are looking to limit their risk exposure.
History of Knock-outs
The knock-out option was first introduced in the early 2000s as a way to limit the risk of investing in the stock market. The idea behind the knock-out was to provide investors with a way to limit their losses if the market moved against them. The knock-out option was designed to be a more conservative way to invest in the stock market than traditional options. The knock-out option has become increasingly popular in recent years as investors look for ways to limit their risk exposure.
Comparison Table
| Option Type | Risk Exposure |
|---|---|
| Traditional Option | Unlimited |
| Knock-out Option | Limited |
Summary
A knock-out is a financial instrument that is designed to limit the amount of risk an investor can take on. It is a type of derivative that is used to protect against large losses. The knock-out is a type of option that has a predetermined price at which the option will expire. If the price of the underlying asset reaches the predetermined price, the option will expire and the investor will not be able to exercise the option. For more information about knock-outs, investors can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Options
- Derivatives
- Stock Market
- Risk Management
- Options Trading
- Put Options
- Call Options
- Volatility
- Hedging
- Expiration Date
