1. An option whose payout is fixed when the underlying assets exceeds a predetermined threshold or strike price.
2. Also referred to as “binary” or “all-or-nothing option”.
So you’ve chosen your asset, selected an expiry time, entered the amount you want to invest, and approved your trade. Now what?
When investing with a digital option there are only three possible results when your position expires.
When a trader has correctly predicted the outcome of a digital option, his position is classified as “in the money”, and he / she will be rewarded with the predetermined payout (up to 81% on certain currency pairs).
When a trader is unable to correctly predict the outcome of a digital option, his position is classified as “out of the money”. An “out of the money” digital option provides no return for the trader.
When a digital option expires at exactly the same price as when it was opened, the position is classified as “at the money”. An “at the money” digital option is considered a tie, and the investment amount is returned to the trader.
Although digital option trading utilizes assets from the Foreign Exchange market, they are traded very differently to Forex. The price at which the option is exercised (the “strike price”), is determined from the spot rate of the asset in the Forex or Commodities market.
Digital Options allow a trader to take advantage of market volatility on a broad range of products including Currencies, Commodities, Indices and Stocks. Digital Options are one of the fastest growing investment products for both retail and institutional investors.