A knock-in barrier option might be used if the investor is looking to reduce the cost of buying a call option.

Question

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A knock-in barrier option is an option that only becomes active (knocks in) once the underlying asset reaches a certain price level (barrier). By using a knock-in barrier option, the cost of buying a call option can be reduced as the option only becomes active if the price of the underlying asset reaches a specific level. This can be useful in situations where the investor believes the underlying asset is likely to reach the barrier level at some point in the future.

A Knock-In Barrier Option Might Be Used If the Investor