A knock-In option is a type of barrier option that only comes into existence when the price of the underlying security reaches a specified barrier at any point in time during the option's life. Once a barrier is knocked in, or comes into existence, the option will not cease to exist until the option expires.
Knock-in options may be classified as up-and-in or down-and-in. In an up-and-in barrier option, the option only comes into existence if the price of the underlying asset rises above the pre-specified barrier, which is set above the initial asset price. Conversely, a down-and-in barrier option only comes into existence when the underlying asset price moves below a pre-determined barrier that is set below the initial asset price.
For example, assume an investor purchases a up-and-in call option with a strike price of $60 and a barrier of $65, when the underlying stock was trading at $55. Therefore, the option would not come into existence until the underlying stock price moved above $65.