Digital Option


DEFINITION of 'Digital Option'

An option whose payout is fixed after the underlying stock exceeds the predetermined threshold or strike price.

Also referred to as "binary" or "all-or-nothing option."

BREAKING DOWN 'Digital Option'

The value of the payout is determined at the onset of the contract and doesn't depend on the magnitude by which the price of the underlying moves. So, whether you are in the money by $1 or $5, the amount that you receive will be the same.

  1. Call

    1. The period of time between the opening and closing of some ...
  2. Out Of The Money - OTM

    A call option with a strike price that is higher than the market ...
  3. Strike Price

    The price at which a specific derivative contract can be exercised. ...
  4. Exotic Option

    An option that differs from common American or European options ...
  5. Intrinsic Value

    Intrinsic value is the actual value of a company or an asset ...
  6. In The Money

    1. For a call option, when the option's strike price is below ...
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  3. Can mutual funds invest in options and futures?

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  4. How does a forward contract differ from a call option?

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