Digital Options are a new product offered by trading platform IQ Option . These are an innovative and surprising product, which we personally tested and will give you a practical example of in this article, with screenshots and explanations. If you don’t have time or feel like reading, here are its main advantages:
- Profitability up to 900%
- Choice of degree of difficulty of the option
- Possibility of selling the option at any time
- All operations completed with a single click
You might be wondering “aren’t these claims a tad exaggerated?” No, it’s exactly as we reported above. This is a new type of option, which in fact goes to draw from the best features of various other types of options, such as range and touch options, but that can’t be framed with either one or the other.
It is therefore a new type of binary option, with which to seek profit from the rise and fall of the price of assets on which you are trading.
Binary option and digital option
When digital options were launched a short while ago, we immediately wondered what the novelty was, since in fact binary options and digital options, up to a short time ago, were synonymous as it is still possible to verify from the Wikipedia page about binary options.
However, if an important broker like IQ Option launches a product and calls it Digital Options, we are required to inform ourselves and then associate this term with the digital options offered by IQ Option, at least in this article.
You all probably know how binary options trading works. Let’s now discover the trading of digital ones.
Trading with digital options, what changes?
While with simple binary options you simply choose between two directions, UP or DOWN, with digital options you choose between multiple levels .
But what exactly does that mean?
To explain it in a simple way, look at this picture:
As you can see, on the right of the graph, around the dotted price line, price levels appear within an ellipse (129.0800; 129.0600; etc.).
These price levels can be clicked to tell the platform that this price is deemed achievable . For example, if I think that a price can get to 129.0600, I’ll click on the corresponding button.
Look what happens if I click on 129.0600.
Please note: not only is the 129.0600 button highlighted, but the percentages of profits related to the UP and DOWN options also change. First they were 95% and 82% while now they are 243% and 25%. This means that if you buy the UP option you could make a profit of 243% if you reach the goal . On the flip side, by purchasing the DOWN option, you could make a profit of 25%
What are the differences in percentage profit due to?
Why, in the image we just saw, is there so much difference in profit between the digital UP and the digital DOWN options?
Here is the explanation.
The percentage of profit varies according to the current probability that an option reaches a certain level . The greater the risk, the greater the percentage of possible profit.
This means that even the safest binary options can be chosen, with a higher probability of success, but with lower premiums.
Buy already IN THE MONEY Digital Options
Look at this graph.
Do you notice something? There is a tide of difference between the percentage profit of the UP digital option and the DOWN digital option with respect to the 129.0200 level.
Here is a simple explanation of what is going on:
- The price of the asset is 129.049055
- Level 129.0200 is selected
- The possibility that the option goes below the level selected at maturity pays out 451%
- The possibility that the option does not reach this level at maturity is paid out 12%
What does this mean?
It means that when you are buying the option, it is already IN THE MONEY.
There is a large in the money area.
In order not to pay, the option would have to suffer a sudden drop and fall below the 129.0200 level.
Identify trends to reduce risks and earn more
It may seem trivial to say, because everyone knows that identifying price trends is one of the most important things to do in online trading in general.
What we need to highlight, however, is that with digital options, this topic matters a lot more .
In fact, given there is the possibility to buy digital options that are already In The Money means that you can protect the percentage of profit already in place with the support of an ongoing trend.
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This means that if you find a trend in place, for example on the upside, the UP options of a lower level will be much safer. Profit percentages will tell you, but your analysis will also tell you this.
To identify the current trends , you can help yourself with the technical analysis tools that the platform offers, or act faster with your eyes and common sense.
In any case, you will always be free to undertake a more aggressive trading approach, i.e. aimed at the highest profit. This will obviously be more difficult, especially for very high percentages. In fact, it will be necessary to identify trend changes and inversions.
Higher profits? By identifying trend inversions.
The more difficult the forecast is, the higher the profit achievable with the digital option will be . What are the most difficult forecasts? Those concerning trend reversals.
And yet, they’re not so difficult . Here’s why:
The longer the digital options are, the less difficult it is to forecast trend reversals.
In fact, the signs that indicate a trend reversal are many. These signals can be interpreted on the basis of technical indicators applied to the graphs in real time, which analyse the price movements in a given period and produce lines according to mathematical and statistical methods. There are various technical indicators specialized in identifying probable reversals, including the RSI indicator, also called the Relative Strong Index or Indicator of Relative Strength. To this you can also add the ADX.
In any case, as it may seem obvious, the best technical tools to highlight trends and try to identify possible inversions, are trend lines. These are the classic lines (nice and straight!) that pass from highs to lows in a given time period.
Sell digital options? Whenever you want
We already mentioned in our opening that this is the extraordinary advantage of digital options. At any time, you can sell them in order to wrap up operations and cash in or lose what you have earned or lost up to that point.
It is not necessary to wait until the option expires . At any time you can click on “sell option”, to secure profits or reduce losses.
As you can see from this image, although the expiration of the option hasn’t yet matured, passing the cursor over the small arrow created when opening the position, the profit resulting from the sale of the option purchased is indicated. Just click on it to sell it and collect any profit . Likewise, losses can be stopped, in case the price keeps going against its forecast.
Not bad, right?
This feature allows you to enjoy greater flexibility in managing results.
We have explored how digital options work and what their main advantages are. The differences between digital options and binary options are few, but still significant. The option to choose one’s own objective and set the percentage of profit and the return of the percentage of risk, represents an innovative aspect, which we are sure will appeal to binary options traders from all over the world.Open a free IQOption Demo account here
As we said at the beginning, the maximum percentage profit attainable with trading digital options is 900% . This means that you can not go beyond this limit. Nonetheless, this is a very high limit. For example, to earn €900 with €100 is anything but limited, but it’s still a limit. This limit, for example, doesn’t apply to classic options.
Note: classic options are not classic binary options!
Classic options, which we have discussed in several articles, represent options with which the profit is proportional to the performance of the asset price and have no limits. Obviously, achieving 900% profit is somewhat difficult.
Therefore we can conclude by saying that for us digital options currently represent the type of option with which you are more likely to be highly profitable and certainly more flexible in all operational choices .
Always remember the other side of the profit coin though. You can make money but also lose it. In any case, as you know, losses incurred with options are always limited to a single transaction, i.e. the cost of the option purchased .