A barrier option in which the barrier lies in the in-the-money side of the strike price. More specifically, it is a long-dated put or call option/ warrant on stock or stock market indices whose value at expiration is path-dependent. At expiration, the value of the warrant will be determined based on the path followed by the underlying price over the option’s life. The option is embedded with an upper or lower barrier which activates or de-activates the ability of the option holder to exercise during the remaining time of its life. For example, an up-and-in call option on a given stock market index means the turbo warrant would be activated if at any point during its life the underlying index could break through the upper barrier.

Typically, the price of a turbo warrant is lower than that of an otherwise identical vanilla warrant (regular warrant) because the barrier, in a turbo warrant, exposes the holder to additional risk (the risk that the holder will not be able to exercise if the underlying price moves in an unfavorable direction (in which case, the holder will receive no payment).