A digital option is a binary option traded on an exchange regulated by the Commodity Futures Trading Commission (CFTC)

 

Digital options allow traders a way to profit from correct, short term predictions on the outcome of some underlying asset such as a currency pair. Digital options are binary options traded on a Commodity Futures Trading Commission (CFTC) regulated exchange in real time.

 

Binary options platforms have been growing rapidly since mid-2008.

 

A digital option is a trade with a simple Yes or No option about where the underlying index value will be at a specified time in the future.

 

question-box

 

Consider the example above, there are two possible digital option positions to take on this market:

Yes, you believe the price of Gold will be above $1100 at 3:00PM.

No, you believe the price of Gold will be below $1100 at 3:00PM.

 

While the market may jump around before the selected 3:00PM expiry, the only factor that matters is where the market is at the time of selected expiry.

 

Let’s say you believe yes, the price of Gold will be above $1100 at 3:00PM. There are three possible outcomes of this digital option:

• If the market is above $1100 at 3:00PM, the trade will settle at $1.

• If the market is at exactly $1100 at 3:00PM, the trade will settle at $.50.

• If the market is below $1100 at 3:00PM, the trade will settle at $0.

 

To learn more about placing a trade on the Cantor Exchange, please visit How To: Trade.

 

 

For additional information on Digital Options, please contact us!