A digital option is an option with a fixed payout attached to it, this payout is a percentage figure extracted from the invested amount.
The fixed payout percentage is set at the onset of the contract and the Digital Option can expire either in the money, at the money or out of the money.
If the option expires within the money, it does not matter how deep it is in the money, it will pay the same payout percentage for all digital options within the money.
If the option expires out of the money, the trader can expect to keep up to 81% of his initial investment; this outcome is already set at the onset of the contract.
If the option expires at the money, it means that the expiry level equals the level at which the contract was made, in that case the client receives his full investment amount.
Digital options are a way to protect your portfolio investment in a rapid moving market. They are also a way to speculate on market movement.
An digital option can be a Call option Or a Put option;
A Call option – is an option that provides profits to its holder once the underlying asset price increase in value, compared with the price quoted at the onset of the contract.
A Put option – is an option that provides profits to its holder once the underlying asset price decreases in value, compared with the price quoted at the onset of the contract.
