Out of the money in digital options refers to the situation when the prediction is incorrect. In this case, you will lose the investment amount. For Higher options, out of the money occurs if the current price is below the strike price at expiry. For Lower options, this situation happens when the current price at expiry is above the strike price.

Examples of Out-of-the-Money Situations

To better understand how it works in trading, it is worth giving some live trading examples. A trader buys a Higher contract for GBP/USD at 1.3530, expecting the price to move higher within 10 minutes. They invest $10 in the trade. However, at the expiration moment, the price is 1.3528, and the out-of-the-money situation occurs, which means that the market participant loses $10.

For a Lower contract, a trader decides that ETH/USD will move below 3,700 and opens a $20 trade with expiration in 1 minute. However, the price moves higher and reaches 3,705 in one minute. If this happens, they lose $20.