Introduction to Thales Digital Options
Digital Options allow traders to profit from correct predictions on the future price of an asset. They are based on a statement with only two possible outcomes – yes or no – and enable you to speculate on the likelihood of the event occurring before the option expires.
Digital options work by offering two possible outcomes from any given trade: if your prediction is correct, you generate a profit. If you’re incorrect, you lose premium paid. The maximum potential profit or loss are defined before the trade is placed. These maximum amounts depend on factors like the premium you pay, distance to strike price, distance to strike date and the volatility index of the underlying asset.
Benefits of Digital Options:
Easy to understand and relatable model.
Limited risk environment with capped downside (no risk of liquidation on long calls).
Near expiry a great amount of leverage.
Flexibility to choose Strike Price and Strike Date.
Potential max losses known before executing the trade, allows for easy risk management.
Thales Digital Options use this concept to provide permissionless, fully collateralized, non-custodial on-chain Digital Options trading experience.
Thales provides simple UP/DOWN options as well as IN/OUT price range Digital Options. The underlying Thales AMM offers on-demand liquidity for these options by using distance to strike price, distance to strike date and the volatility index variables of each market to algorithmically price the options.
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