What are digital options?
A derivative financial product called an option is one that is based on any underlying asset, such as a stock, a pair of currencies, oil, etc.
DIGITAL OPTION – a non-standard option that is utilized to profit from changes in the value of such assets over a specific time period.
A digital option can result in a loss or a fixed income (the difference between the trading income and the asset’s price), based on the conditions of the transaction and the timing set by the parties (in the amount of the value of the asset).
Because the digital option is purchased in advance at a predetermined price, the potential profit and loss are known even before the trade.
Another feature of these transactions is the deadline. Every choice has a specific duration (also known as an expiration or end time).
No matter how much the price of the underlying asset has changed (up or down), a fixed payment is always given in the case of an option win. Therefore, the extent of your risks is determined by the cost of the option.
What are the varieties of digital options?
You must choose the asset that will act as the underlying security while trading options. Your projection will be carried out on this asset.
Simply put, when you purchase a digital contract, you are making a wager on the direction of the price of the underlying asset.
An “item” whose price is considered when a trade is completed is referred to as an underlying asset. Typically, the most sought-after products on the market serve as the underlying asset of digital options. They come in four varieties:
- securities (global company shares)
- currency pairs (EUR / USD, GBP / USD, etc.)
- raw materials and precious metals (oil, gold, etc.)
- indices (SP 500, Dow, dollar index, etc.)
The concept of a universal underlying asset does not exist. You may only choose it based on your own knowledge, intuition, and a variety of analytical data, including market analysis for a certain financial instrument.
How to Trade digital options?
1. Choose asset for trading: Currencies, Commodities, Crypto or Indices
- The list of resources is scrollable. The resources that are at your disposal are highlighted in white. To trade on an asset, click on it.
- Multiple assets can be traded at once. To the left of the asset section, click the “+” button. The asset you select will accrue value.
The profitability of the asset is indicated by the percentage next to it. The greater the proportion, the greater your potential profit.
Example. If a $10 transaction with an 80% profitability closes successfully, your account will be credited with $18. You invest $10, and you make a profit of $8.
Depending on the market conditions throughout the day and the time a trade expires, the profitability of some assets may change.
Every trade closes profitable, just as it did when it was opened.
2. Choose an Expiration Time
The trade will be deemed finished (closed) during the expiration period, and the outcome will then be automatically added up.
You freely choose the execution time for a trade when using digital options—it might be one minute, two hours, a month, etc.
3. Set the amount you’re going to invest. The minimum and maximum trading amounts are $1 and $1,000, respectively, or their equivalents in the currency of your account. We advise you to begin with modest trades in order to gauge the market and gain comfort.
4. Analyze the price movement on the chart and make your forecast. Depending on your forecast, select the Up (Green) or Down (Red) alternatives. Press “Up” if you anticipate a price increase, and “Down” if you anticipate a price decrease.
5. Wait for the trade to close to find out whether your forecast was correct. If it was, your balance would increase by the amount of your investment plus the asset’s earnings. If your prediction was off, you wouldn’t get your money back.
Under The Trades, you can keep track of the progress of your order.
Frequently Asked Questions (FAQ)
What are the possible results of the placed trades?
There are three possible outcomes in the digital options market:
1) In the event that your forecast on the movement of the underlying asset’s price is accurate, you will be paid.
2) If your prediction was incorrect by the time the option expired, your loss is capped at the asset’s value, meaning you can only lose your initial investment.
3) You receive your investment back if the outcome of the trade is zero (the value of the underlying asset has not changed, and the option expires at the price at which it was purchased). As a result, the size of the asset value will always be the single factor limiting your risk exposure.
What determines profit size?
There are several factors that affect the size of your profit:
- the market liquidity of the item you have selected (the higher the asset’s demand, the higher the profit you will make).
- the time of the trade (an asset’s liquidity can differ dramatically in the morning and the afternoon)
- fees charged by a brokerage firm
- alterations in the market (economic developments, modifications to a certain financial asset, etc.)
How can I calculate the profit for a trade?
You do not have to calculate the profit yourself.
Digital options have a predetermined profit each transaction that is determined as a percentage of the option’s value and is unaffected by how much that value changes. Assume you will receive 90% of the option’s value if the price shifts in the direction you predicted by just one position. If the price moves 100 positions in the same direction, you will still be paid the same amount.
You must carry out the following actions in order to ascertain the profit amount:
- Pick the thing that will underpin your proposal.
- Specify the amount at which you would have bought the option.
- choose the trading time, and if your prediction was correct, the site will then automatically display the precise percentage of your profit.
Up to 98% of the investment can be made as a profit from the trade.
A digital option’s yield is predetermined at the time of purchase, so there’s no need to wait for unpleasant shocks like a lower percentage at the end of the trade.
Your account will instantly be credited with the profit as soon as the deal is closed.
What is the gist of digital options trading?
The simplest kind of derivative financial instrument is, in reality, a digital option. You don’t need to forecast the potential value of an asset’s market price to succeed in the digital options market.
The fundamental idea behind trading may be distilled down to the accomplishment of a single task: determining whether an asset’s price will rise or fall by the time the contract is executed.
The benefit of these options is that from the time the trade is closed until the next, it makes no difference to you whether the price of the underlying asset increases by 100 points or only one. It is crucial for you to simply predict the evolution of this price in one way.
If your prediction is accurate, you will still receive a fixed income.
How to learn quickly how to make money in the digital options market?
You only need to accurately anticipate whether the price of the asset you have picked will go up or down in order to make money on the digital options market. So, in order to have a steady income, you need:
- Create your own trading tactics that will result in the most correctly forecasted trades, then implement them.
- Spread out your risks.
You will benefit from studying analytical and statistical data that is available from a variety of sources, including the company website, expert opinions, analysts in this field, and other sources, in order to develop strategies and look for options for diversification.
At what expense does the Company pay profit to the Client in case of successful trade?
With customers, a company makes money. Because the Company receives a percentage of payments for the Client’s successful trading strategy, it has an interest in the share of profitable transactions significantly outpacing the share of unprofitable ones.
Additionally, all of the Client’s trades together make up the Company’s trading volume, which is transferred to a broker or exchange and added to the pool of liquidity providers, all of which contribute to an increase in the market’s liquidity.
What is a trading platform and why is it needed?
A software system called a trading platform enables the client to carry out trades (operations) utilizing various financial instruments. It also has access to a variety of information, including the value of quotations, current market positions, the company’s actions, etc.