Barred Call Link <Trusted Method>

Payoff | | / (alive path) | / | / | / |____/_________________ S_T K

Apple (AAPL) at $150 Strike (K): $160 Barrier (B): $180 Expiry: 3 months Vanilla call premium: $5.00 Barred call premium: $2.50 (cheaper because of knockout risk) barred call

Near the barrier, a barred call behaves like a lottery ticket – it’s either worthless (knocked out) or valuable (alive). Gamma risk is extreme. Payoff | | / (alive path) | /