Glossary of trading terms

To limit your trades due to inclement trading conditions. In either choppy or extremely narrow markets, it may be better to stay on the side lines until a clear opportunity arises.

Kiwi is the colloquial name for the New Zealand Dollar (NZD), coined after the flightless Kiwi bird featured on the island nation’s $1 coin. In forex pairs the NZD is often referred to as the ‘Kiwi.’

A knock-in option is a type of options contract that is not activated until a predetermined price is reached. The knock-in options contract is inactive until that price is reached.

Knock-in options are one example of a barrier option: options contracts with earnings dependent on whether the underlying asset reaches a specific price level, referred to as the barrier price.

In the case of a knock-in option, the barrier price must be achieved or surpassed before the option’s expiration in order to become active. There are two types of knock-in options:

• Down-and-in options, which are activated when the underlying asset’s price dips below the barrier price
• Up-and-in options, which are activated when the asset’s price rises above the barrier price

Knock-in options are mainly used in commodity and currency markets and can be traded over-the-counter. Premiums on these options are usually cheaper than regular options, but buyers run the risk of not realizing any profits if the barrier price is not hit before expiration.

Option that nullifies a previously bought option if the underlying product trades a certain level. When a knock-out level is traded, the underlying option ceases to exist, and any hedging may have to be unwound.

A knock-out option is a type of option that expires or “knocks out” if the asset surpasses or falls below a certain price. The knock-out options contract is active until the predetermined price is hit.

 Knock-out options are one example of barrier options: options contracts with earnings dependent on whether the underlying asset reaches a specific price level, referred to as the barrier price.

Until the asset reaches the barrier price or expires, the knock-out options contract is active. If the barrier price is reached, the options contract expires prematurely. There are two types of knock-out options:

• Down-and-out options are active until the asset dips to or below a predetermined barrier price.
• Up-and-out options give the holder the right to buy or sell an asset at a specific price if the option does not rise to or past a specific barrier price.

Knock-out options are mainly used in commodity and currency markets and can be traded over-the-counter. Premiums on these options are usually cheaper than regular options, but buyers run the risk of not realizing any profits if the price target is hit.