In a three-month down-and-out call option on silver futures the strike price is $20 per ounce and

Question:

In a three-month down-and-out call option on silver futures the strike price is $20 per ounce and the barrier is $18. The current futures price is $19, the risk-free interest rate is 5%, and the volatility of silver futures is 40% per annum. Explain how the option works and calculate its value. What is the value of a regular call option on silver futures with the same terms? What is the value of a down-and-in call option on silver futures with the same terms?

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.