The strike price in digital options refers to the price of the asset at the moment when you buy a digital option contract. It determines whether the trade closes in the money or out of the money. When a trader buys a digital option contract, the platform records the strike price. At the moment when the contract expires, the platform checks whether the quotes are above or below the strike price, and this determines the results. Thus, the strike price is critical to define profitable and losing trades.

How the Strike Price Works

To better understand the strike price, it is worth looking at how it works in trading. Here is a step-by-step explanation:

1. A trader selects an asset (this can be a currency pair, a stock, a commodity, or any other).
2. You buy a digital option contract at a specific price, which is known as the strike price.
3.  You select a direction that you expect the price will move until expiration (Higher or Lower).
4. The platform checks the results at the moment of contract expiration by comparing the current price and the strike price.

For example, you buy a Higher contract on USD/JPY with the strike price at 145.00 and a 5-minute expiration. If the price at expiry is at least 145.01, then the option will expire in the money (with profit). If you decide to buy a Lower contract on Gold at 3,340 as the strike price with a 1-minute expiration, then to profit from this contract, the price should be at least 3,339 in one minute.