1. What is a Barred Call? A Barred Call (often referred to as a Call Barrier Option or Up-and-Out Call ) is a type of exotic option that becomes null and void if the underlying asset’s price touches or crosses a predetermined barrier level before expiration. The holder pays a lower premium than a standard vanilla call because they are "barred" from profit if the price rises too high.
A: Most OTC barrier options use continuous monitoring (any tick). Some exchange-listed barrier options (rare) use daily closing prices. barred call
A: Yes, writing a barred call collects premium but you face unlimited risk if barrier not hit? No – as writer, your max loss is capped because option knocks out if barrier hit. But if barrier never hit, you pay the full payoff (stock price minus strike). So writing is dangerous if barrier is far away. The holder pays a lower premium than a
*Actually, maximum gain if barrier is not touched = B - K (since the option knocks out if price goes above B, so alive path caps gain at just below B). The premium of a barred call is less than a vanilla call by an amount equal to the rebate (if any) + the probability of knockout times the expected loss of upside. A: Yes, writing a barred call collects premium