An FX option that gives the buyer of the option the right to receive an agreed monetary amount (the payoff) if and only if the FX spot rate of the underlying currency pair hits either of the two predefined barriers before or at a specified future date (expiration date).

If the FX spot rate hits one of the two barriers at any time during the option’s lifespan, the option’s payoff will be paid at the option’s expiration date, depending on market conventions (normally two business days after expiration, T+2). The payoff is defined at inception and must be settled in one of the currencies in the underlying currency pair of the option.

The underlying price is liable to change until the transaction is agreed upon. Once concluded, the agreement becomes binding for the seller of the option. However, the parties can negotiate an early termination before maturity. If the transaction has a market value, an early termination may result in the seller paying the present market value to the buyer.