Digital options

DEFINITION of digital options

Digital options are a type of option with a fixed payout if the underlying market price exceeds a predetermined limit, called the strike price.

WHAT IT IS IN ESSENCE

The loss is also fixed if the underlying asset doesn’t move past the threshold. A digital option depends on one proposition. The underlying asset expires in the money at the expiration date and time.

Digital options allow traders to profit from exact predictions on the future price of an asset.

They are a declaration with only two answers – yes or no.

They enable you to speculate on the likelihood of the event occurring before the option expires.

The legitimacy of the operation is questionable, and it may operate in a slack regulatory jurisdiction. Many trading sites are based in exotic island locations, so you have little legal recourse.

Even if it is legit and works in a well-regulated environment the chances to let acquiring fabulous wealth, are slim. Chances of you losing your money are enormous.

These risks are spelled out in small print on the site, but they are intentionally understated. True is that some brokers may offer legit ways to trade Binary Options but be vigilant.

On the internet, you can find a plenty of testimonies of cheated people.

Speaking of internet, binary options providers are especially dangerous because they understand how information spreads on the internet. For example, Googling phrases such as “are binary options a scam?” frequently directs users to websites operated by binary options companies.

HOW TO USE

Digital options can only be offered to professional clients. So you’ll need to confirm that you’re eligible before being able to trade them.

Digital options work by offering two possible outcomes from any given trade. If your prediction is correct, you generate a profit. If you’re incorrect, you lose your initial output.

Before opening a position, you’d decide whether you think your chosen market price is headed up or down. If you believe it will go up, you’d buy a digital option known as a call. If you think it will go down, you would buy a digital option known as a put.

Calls return a profit if the underlying market price is above the strike price when the option expires.

Puts are the opposite – they return a profit if the underlying market’s price is below the strike when the option expires.