Warrant with Knock-Out — Put
A put that is already in the money and dies if the underlying touches the knock-out level above it.
Payoff at maturity
Move the parameters; the product formula and its building blocks are recomputed from the same engine that is tested against the workbook.
The knock-out is path dependent. The chart shows the value at expiry given whether the knock-out level was touched.
- Knock-out level never touched
Value 10 %
Per 10'000 of nominal
| Underlying at maturity | Level | Value | Amount | Gain / loss |
|---|---|---|---|---|
| −30 % | 70 % | 40 % | 4'000 | −6'000 |
| unchanged | 100 % | 10 % | 1'000 | −9'000 |
| +30 % | 130 % | 0 % | 0 | −10'000 |
For leverage products the nominal stands for the initial underlying level; the amount is the value of a position that controlled 10,000 of underlying at the start. Premium, financing and time value are not included. Scenario: Knock-out level never touched.
Data table and formulas
Warrant with Knock-Out - Put (2200), scenario "Knock-out level never touched": value per unit at maturity for an underlying at 0 % → 110 %; 100 % → 10 %; 110 % → 0 %; 200 % → 0 % of its initial level.
| Series | Formula | 0 % | 25 % | 50 % | 75 % | 100 % | 125 % | 150 % | 175 % | 200 % |
|---|---|---|---|---|---|---|---|---|---|---|
| Up and Out Long Put - ITM | if S ≤ knock-out level: 1 × max(strike − S, 0); otherwise 0 | 110 | 85 | 60 | 35 | 10 | 0 | 0 | 0 | 0 |
| Rebate at Knock-Out | if S > knock-out level: rebate; otherwise 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Product | if S ≤ knock-out level: max(strike − S, 0); otherwise rebate | 110 | 85 | 60 | 35 | 10 | 0 | 0 | 0 | 0 |
Largest difference between the sum of the blocks and the product formula over the grid: 0.0e+0.
How it is built
Each block drawn on its own, then added. The last chart is the sum, and it is identical to the product line above.
- Up and Out Long Put - ITMif S ≤ knock-out level: 1 × max(strike − S, 0); otherwise 0
- Rebate at Knock-Outif S > knock-out level: rebate; otherwise 0
- Product: knock-out level never touchedif S ≤ knock-out level: max(strike − S, 0); otherwise rebate
Largest gap between the sum of the blocks and the product formula on this grid: 0.0e+0. The same identity is tested for every product and scenario in the site's test suite.
Construction, as listed in the workbook
- Up and Out Long Put - ITM (strike = Knock-Out Level)
- Rebate at Knock-Out (One-Touch Digital) - usually zero
In plain English
An up-and-out put struck at or above the knock-out level. Value is strike minus underlying, with little time value. A rise to the knock-out level ends the product.
The rebate parameter covers stop-loss versions that pay a residual on knock-out; the classic version pays nothing.
Chances and risks
Chances
- Leverage on a fall without time value.
- Transparent pricing.
Risks
- Total loss on a touch of the knock-out level.
- Intraday moves count.
- Issuer credit risk.
Who it fits
- Active traders hedging or shorting with tight risk control.
Who it does not fit
- Buy-and-hold investors.
Nearby on the map
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