As technologies advance, trading products and platforms have evolved, allowing for traders to access markets that otherwise would be unattainable. Digital options have grown in popularity and allow traders to have exposer in markets with limited risk. One of the platforms that allows you to trade digital options is IQ Option. Having defined risk with digital options, along with the varied expiration times make it an attractive way to enter the markets. However, there are some differences to their close cousin the binary option and this can make digital options a more attractive way to enter the market.
What are Digital Options?
Digital options are a product that allows you to pick a strike price at a certain point in the future, and if it expires in the money you are given a fixed payout. On the other side of the equation, if you are incorrect in your market assumption you will lose your principal balance on the trade.
As you trade close to where the market currently is, you increase your payout due to the greater odds it expires out of the money. However, if you select an in the money digital option, the payout may be less as you have a greater chance of being in the money. This gives you the trader freedom to profit in different market situations.
Difference Between Binary Options and Digital Options
One of the main differences between binary options and digital options are the way the strikes are set. With a binary option, you trade at what the market is at. For example, if the S&P index is trading at 100, you can only purchase or sell the 100 strike. However, with a digital option you can select a strike price that is deeper in the money or near the current market levels. The payouts work differently as well, depending on where you select your strike price.
Digital options have several advantages and the first is the flexibility on strike prices. With traditional binary options, you are limited to what the market is and this may not fit all trading strategies. Allowing yourself the ability to choose a strike opens up the possibility for more traders.
Another advantage to digital options are even though you may be in the money with your strike, you can still make money. Granted, you will earn less on your position should you be correct, it can be a conservative way compared to others to have exposure in the market.
One of the disadvantages to digital options are when you go further into the money with your trade you will have a less payout. While this is due to odds of being profitable, it may lead you to need additional positions to generate a sizable income. Another disadvantage are the fixed payouts compared to traditional options. If the market continues to trade in your favor, you still are capped at the fixed return percentage. Whereas with a traditional vanilla option, you can continue to earn more profits as the market works in your favor.
Is IQ Option Reliable?
As with any platform, it is important to understand if it reliable as you are trusting the platform with your money. According to IQ Option official website, it appears the company has continued to grow in trades and clients. From there, it appears they have fast withdraw times and solid customer service.
Beyond that, they are regulated by the CySEC, which covers traders who are located in Europe. Outside of that, they are not a licensed platform and should be considered carefully. They appear to have a professional platform and website, but ensure the platform fits your needs before depositing funds.
If you want to see if IQ Option is the right fit for you visit their website and open an account. You can see what they have to offer via products and the extent of education section as well. Digital options a great way to add diversity to your trading toolbox and by having this additional option you can further your trading skill set and knowledge base.