Option entitling the holder to an amount fixed in advance in accordance with the contractual terms. – In the case of a digital option (binary option), payment is made if the price of the underlying reaches a specified value within a specified period, either once (one-touch digital option) or precisely on the expiration date (all-ornothing option). – In the case of a lockout option, the contractually agreed amount is only paid out if the price of the underlying asset does not reach a set barrier within a specified period. – The writer of a payout option owes the contractually agreed amount in full when the barrier is reached, and completely irrespective of whether and how deep the option is exactly in the money when exercised or on the expiration date. The amount owed can therefore be considerably larger or, for the buyer, considerably smaller than the intrinsic value of the option.
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