This bet pays if the market never touches two pre-determined trigger barriers (one downside barrier and one upside barrier). You believe that the market will never touch two pre-determined barrier levels (high and low) before or on the date the bet expires. In other words, when you buy a barrier range you will win only if the market never touches the two barrier levels you have chosen.
Example: [Pays 100 if the FTSE never touches X and Y between today and date T]
You believe that the market will never touch two pre-determined barrier levels (high and low) before or on the date the bet expires. In other words, when you buy a barrier range you will win only if the market never touches the two barrier levels you have chosen.
Suppose its Tuesday June 24th 2003, Microsoft Stock is presently trading at $25.96 and you anticipate that Microsoft Stock will remain stable between two limits: $24 (low) and $27 (high).
You log onto your account; click on «Barrier Range» on the lower middle left hand side of the screen and select «US Stocks» as the market to display from the middle left hand side drop-down menu. (Under «Markets»). After inputting these parameters in our dealing system it returns this message:
I wish to win «USD» «500» if during the next «14» days «Microsoft Stock» *never* touches nor trades through (low barrier) 24 nor (high barrier) 27.
YOU wish to win USD500 if Microsoft stock stays between 24 and 27 at all times between now and 8-Jul-03 (inclusive).
The cost of this bet is USD227.3 which means that your potential profits are USD272.7. [ie USD500 (Total Payout) minus USD227.3 (Cost of Contract) = USD45.4]
If Microsoft Stock climbs to $28 on June 28th, then you lose your stake of USD227.3 since $28 is higher than your upper barrier of $27.
If Microsoft Stock falls to $23.9 on July 7th, then you lose your stake of USD227.3 since $23.9 is lower than your lower barrier of $24.
You will win only if Microsoft Stock always remains between your lower and upper barrier levels for each of the running days until the final expiry date.
Note I: Days to expiry are counted as calendar days and not business days. In other ways weekends count and our dealing systems takes account of this when pricing bets. The above bet was purchased on June 24th to expire in 14 days time; July 8th. So the days included are 24, 25, 26, 27, 28, 29, 30, from June and 1, 2, 3, 4, 5, 6, 7, and 8 from July. As you can see these are 15 and not 14 days and this is because the bet was not purchased exactly at the opening of the trading day on 24th June but a few hours later and this is taken into account by including part of 8th July.
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