For example, a down-and-out option has a strike price of 100 and a knock-out price of 80. At the option's inception the price of the stock was 95 but before the option was exercisable the price of the stock hit 80, this means the option automatically expires worthless even if the underlying hits 100 before the exercise date.
Investment dictionary. Academic. 2012.
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down-and-out option — barrier option (or knock out option) that initially is a plain vanilla option, but which ceases to exist if the underlying security falls to a predetermined level (the barrier price). Bloomberg Financial Dictionary … Financial and business terms
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