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.

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