The rarest of the three possible outcomes when working with digital options. If target price comes out exactly the same as the price of the underlying asset at the time of the option’s expiration, this is known as the trade result being at-the-money. When this happens – which is a rare occurrence – the amount the trader invested is refunded.
- CFD trading
CFD trading refers to a type of market trading where the investor has only two possible outcomes to choose from. They can choose whether their chosen asset will in their opinion increase in value by a predetermined expiration time, or decrease when the option expires.
- Range Instrument
A digital option trading tool where the trader makes a prediction as to whether the value of an underlying asset will fall inside or outside a specified value range at the time of the option’s expiration.
- Expiry Level
The value of the underlying asset at the time of its expiration.
- Expiry Time
The predetermined time and date at which the closing value of the asset/option will be determined and the investor’s result confirmed.
- High Option
A term that refers to an outcome where a digital option expires at a higher price than when the trade was entered into – offering potential returns as high as 81%.
- High/Low Instrument
A trading instrument that allows the investor to predict whether their chosen asset will expire below or above an established strike price.
When a trader makes the correct decision and their chosen trade expires as predicted, it expires in-the-money and the trader makes a profit. If for example they predicted that the price of gold would fall by the predetermined expiry time and they are correct, the option expires in-the-money.
- Investment Amount
How much the trader invests in any one specific option.
- Market Price
An underlying asset’s current value.
- No Touch Option
A trading instrument where the investor predicts whether the value of an underlying asset will during a predetermined period of time reach a set target price. If at any time it ‘touches’ this target price and the trader entered a no touch option, the trade finishes out of the money instantly.
When a trader is unsuccessful and their predicted trade results in a loss, this is known as the option expiring out-of-the-money. For example, if the trader predicts that the asset’s price will be lower at the time of its expiration and it ends with a higher price, they will lose their investment and the option expires out-of-the-money.
- Return/ Return on Investment (ROI)
The profit the investor receives upon making a successful trade, set in the form of a percentage. If the broker offers a return of 81% on any given trade for example, this would mean that a $1,000 trade that expires in-the-money would result in the trader winning a profit of $1810
- Target Price
An asset’s target price – aka its strike price – refers to the value the underlying asset needs to reach for the trade to end in-the-money. This applies to touch and no-touch trading instruments, where the result is determined by whether or not the asset’s value reaches the predetermined target price.
- Underlying Asset
The asset upon which the trade is based – all commodities, stocks, currency pairs and indices.