What are binary and digital options?
Binary options are high risk financial instruments where a prediction is made regarding the price of an asset at a certain period of the day.
The predictions made relate to very small price modifications, which are extremely hard to predict, hence the high risk factor.
Binary options are also called digital options, two-way-options, all-or-nothing options, and FROs (Fixed Return Options on the
American Stock Exchange) among other names.
These binary names imply “two” and are so named because traditionally there are only two possible outcomes (in-the-money or out-of-the-money).
There are also some platforms also offer an at-the-money function.
This means that in the case of a tie the investor receives back his or her original investment.
Additionally, in the case of a loss, some options at offer
a return of 10%, but this only happens in some specific Forex Platforms.
To summarize this point, the payout for digital options is a fixed amount, nothing at all, or a return of the investment in the case of a tie.