A digital option is an option whose payout is fixed after the underlying stock has exceeded the predetermined threshold or strike price. In digital options, the value of the payout or the amount of money that an individual gets after a contract expires, is normally determined and set at the start of the contract. It is not reliant on the movement of the underlying asset. This means that whether the asset moves by $1 or by $4, the amount of money that a trader stands to receive is the same.
On the other hand, binary options are options whose payout percentage is either a fixed amount or nothing at all. The payout percentage in binary option is often dependent on the movement of the underlying asset and in most cases, it is given as a percentage of the trade amount. In the trade of binary options, the payout percentages are often very high and attractive. While the percentages in the trade of digital options may not be as attractive as those of the binary options, digital options almost always provide the client with a minimum of 75% return on the trade if successful.
What are some of the advantages of trading in digital option ?
To start with, the trade in digital options is relatively simpler than most of the other trades. It is touted as one of the easiest ways of enhancing your earnings by simply looking at the facts and figures in play. Normal traditional trading often requires deep understanding of the market and finance; however, in the trade of digital options, you do not have to worry about that. In addition, the trade in binary options is not as strictly regulated as the conventional trading options. Add this to the fact that the initial investments in digital options have fixed returns thereby helping you manage your risk and you have winning combination. You also get a wide variety of options when trading in binary options.
What are some of the advantages of trading in binary options ?
What comes to mind when people think about binary options is the high payout percentages that are offered by the different binary options trading platforms. In some cases, traders are given up to 91% return on their trades, which is quite high when you come to think of it. This is the major selling point for the binary options over the digital options and for that matter, any of the conventional markets. In addition, there is no complex body of knowledge that is required to trade in binary options. This simplicity attracts even more people. Trading in binary options is also quite accessible considering the large number of platforms available, and it offers a great deal of flexibility to the users.
When placed side by side, the trade in binary options seems to be for people who are willing to invest in much stable environments and those who do not mind volatility. The binary options provide higher returns owing to a larger risk factor compared to the digital options.