What are knock-outs?
Knock-outs are spread bets on an option. They automatically close – or get ‘knocked out’ – if our underlying price reaches your chosen knock-out level. They are available on forex, indices and commodities. Your maximum risk is equal to the options premium you pay on all knock-out trades, multiplied by your size.
Types of knock-out
There are two types of knock-out: bull and bear.
- You’d buy a bull knock-out if you believe the price of the underlying market will rise. The knock-out levels available will be below the current market price
- You’d buy a bear knock-out if you believe the price of the underlying market will fall. The knock-out levels available will be above the current market price