Contents
IQ Option broker is most often approached by investors interested in options trading. Binary options and digital options are the flagship financial instruments on which you can speculate via the IQ Option platform. Today we will focus on the latter, digital options.
Key Takeaways🔑
| →IQ Option is a trading platform that offers digital options as a financial instrument. |
| →Trading digital options involves predicting the direction of an asset's price and choosing an appropriate strike price. |
| →Understanding the difference between binary options and digital options can help you make informed trading decisions. |
How do you trade digital options?
Options transactions are very simple in their premise. First, you determine the value of the trade. Then you determine the expiry time of the option, which is the time when it will exercise. You also need to determine the direction of the price you are assuming.
When the option expires 2 scenarios are possible. In the first, it turns out that your prediction was wrong. Then you lose the money your broker has secured as a amount. If you were right about the market direction, then you receive a premium usually close to 80-90% of the value you declared as the transaction value. Of course, the amount you initially invested also goes back into your trading account.
Later in this article you will learn in detail about the mechanisms that operate within the digital option.
Choosing an asset for a digital option
From the list of trading, instruments pick digital options and select the asset you'd like to trade.
What are strikes in digital option
Notice how the chart is accompanied by several parallel lines. Those are known as strikes or strike prices. Target price levels that the market is supposed to either surpass or stay below.
Click on the strike price that you believe to be achievable. You will see the profitability for both call and put options change accordingly in real time. This way you are able to evaluate your potential profit and risks at a glance.
Keep in mind the more attainable the strike price the lower the profit is going to be and vice versa.
Profit potential with digital options
A single digital option can generate up to nine hundred percent of profit if the price of the underlying asset is moving steadily in your favor.
Selling digital option before expiration
You don't have to wait for the option to expire. Just click sell the option at any point to either secure your profit or cut losses. This feature gives you more flexibility in managing the outcome.
You can purchase multiple digital options of the same asset at various strike prices. This can give you the ability to experiment with different strategies to maximize profit and lower the risk.
Pros and Cons of Digital Options Trading 📈📉
| Pros 😃 | Cons 😕 |
|---|---|
| Higher profit potential | Higher risk compared to some other instruments |
| Flexible strike prices | Limited expiry times |
| Ability to sell before expiration | Requires a good understanding of market movements |
Binary Options vs Digital Options Comparison 📊
| Binary Options | Digital Options |
|---|---|
| Fixed strike price | Flexible strike prices |
| More flexible expiry times | Limited expiry times (1m, 5m, and 15m) |
| Lower profit potential | Higher profit potential (up to 900%) |
What is the difference between binary option and digital option?
In short, digital and binary options differ in their expiry times. Binary options are more flexible here, in digital options we have only 1m, 5m and 15m as the expiry times. What makes digital options different is that you can set a strike price for them. In the case of binary options, the strike price is fixed and it is the price from the moment the trade is opened.
Click here if you want to know the difference between Binary Option and Digital Options
And which options do you prefer binary or digital? Tell us about your experience in the comments below.
We wish you a pleasant trading experience.
FAQs on Digital Options Trading 🤔
- Q: How do I choose a strike price when trading digital options?
- A: Evaluate the potential profitability and risk for each strike price, and choose the one that aligns with your trading strategy and risk tolerance.
- Q: What is the main difference between binary options and digital options?
- A: The main difference is that digital options offer flexible strike prices, while binary options have a fixed strike price.
- Q: Can I sell a digital option before its expiration time?
- A: Yes, you can sell a digital option before its expiration to secure profit or cut losses.
- Q: What expiry times are available for digital options on IQ Option?
- A: Digital options on IQ Option have three expiry times: 1 minute, 5 minutes, and 15 minutes.
- Q: How can I maximize my profit when trading digital options?
- A: To maximize profit, consider using multiple digital options for the same asset at various strike prices, and continually evaluate and adjust your trading strategy.