What are Digital Binary Options?
These are the simplest and most common trades and are sometimes known as all-or nothing options. As described already, the trader is simply predicting whether the price will rise or fall by the stated expiration time.
For example, Google’s shares have a current price of $535.50. The trader decides to buy an option that expires in two hours and pays a 75% return on success. He stakes $100 on his prediction and, at the end of the two-hour period, the price stands lower at $534.10.
If he had purchased a Call option, he would lose and receive a percentage of his stake in return; if he had purchased a Put option he would profit and receive a return of $175, his original stake of $100 plus a 75% payout.
As explained previously, the incremental price movement itself does not matter as it does in traditional options trading. The trader must correctly predict whether the price will be higher or lower at the expiry of the contract – the price may move in either direction by as little as one pip.
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