European digital options

A digital option is a type of option that provides a fixed payout if the underlying asset moves beyond the strike price (higher for call option and lower for put options).

Example of a digital call option

Today is 19th October 2022. The Bitcoin price is at USD 19'000.

Bob believes Bitcoin will be above the current level within a month, but he doesn't expect strong movements.

He buys a 25.11.2022 digital call option, strike USD 19'000, notional USD 20'000 for USD 10'200. This is the maximum he could lose. Bob will receive full notional of option if the Bitcoin price is above the strike on the expiry date.

Bob proves to be right, and the Bitcoin price at expiry (25.11.2022) is at USD 23'100 (above USD 19'000).

His profit is, therefore, USD 20'000.

Given premium paid his net PnL is USD 20'000 — USD 10'200 = USD 9'800.

Example of a digital put option

Today is 19th October 2022. The Bitcoin price is at USD 19'000.

Bob believes in a very pessimistic scenario till year end in which Bitcoin can lose more than 30% from current levels, and he is looking for a leveraged product to monetize his view.

He buys a 30.12.2022 digital put option, strike USD 12'000, notional USD 100'000 for USD 8'900. This is the maximum he could lose. Bob will receive the full notional of the option if the Bitcoin price is below the strike on the expiry date.

Bob proves to be right, and the Bitcoin price at expiry (30.12.2022) is at USD 11'200 (below USD 12'000).

His profit is, therefore, USD 100'000.

Given premium paid his net PnL is USD 100'000 — USD 8'900 = USD 91'100.

Option typeEuropean Digital
UnderlyingPhinom BTH index, Phinom ETH index
Quote currencyUSDC
StrikeUnderlying price set in contract
Expiry8:00 UTC of the Expiry date specified in contract
Expiry spotAverage of the Underlying price over the last 30 minutes before the Expiry
Quote periodAny date before 24h from Expiry
SettlementCash settled
Minimum price tick size0.01
Mininum contract sizeBTC0.1
ETH0.1
Early terminationAvailable, at unwind price
Notional amountBTC10000
ETH1000
Payoff amountCall optionExpiry spot > StrikeContract size * Notional amoun
Expiry spot < Strike0
Put optionExpiry spot < StrikeContract size * Notional amount
Expity spot > Strike0



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