What is the name of the financial instrument that pays out a fixed amount when a strike price has been reached? For example, the contract may stipulate that I get paid exactly $100 when the S&P 500's closing price falls below $2000 in the next 3 months. This is different from put options, because the payout from put options depends on the difference between the strike price and the underlying price. I am looking for the name of an instrument that pays out a fixed amount when the closing price is below a strike price.
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1 Answer
That sounds like a digital or binary option:
A digital option is a type of options contract that has a fixed payout if the underlying asset moves past the predetermined threshold or strike price. There's an upfront fee called the premium for digital options, which is the maximum loss for the option.
answered Jun 13, 2020 at 3:09
