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Why down-and-out barrier option has a positive vega?

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Think of a barrier as a short option of strike=barrier. So you are basicely left with the vega of a put spread, long close to the strike, short close to the barrier. Thats it. read more

AND the +ve Vega of long option has to be greater than -ve Vega of short option. To produce a NET +ve theta and +ve vega, you would need a careful combination of short and long options. Some strategies that come to mind are Calendar or Diagonal. read more

Considered an exotic option, a down-and-out option is one of two types of knock-out barrier options, the other being an up-and-out option. Both kinds come in the put and call varieties. A barrier option is a type of option where the payoff, and the very existence of the option, depends on whether or not the underlying asset reaches a predetermined price. read more

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Barrier-Options
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