What Is a ‘Binary Option’ and How Does It Differ from a Vanilla Option?
A binary option, also known as a digital or 'all-or-nothing' option, pays a fixed, predetermined amount if the underlying asset's price meets a specific condition (e.g. above the strike price) at expiration, and nothing if it doesn't. A vanilla option, in contrast, pays a variable amount equal to the difference between the underlying price and the strike price.
Binary options are simpler and have a fixed payout, while vanilla options have a payoff that is linear to the price movement.
Glossar
Binary Options
Structure ⎊ Binary Options are financial contracts that yield a fixed payout or nothing at all based solely on whether an underlying cryptocurrency price breaches or remains above a predetermined strike price at expiration, offering binary risk-reward profiles.
Vanilla Options
Structure ⎊ Vanilla options, within cryptocurrency derivatives, represent standardized contracts conferring the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date; their structure mirrors traditional equity options, facilitating price discovery and risk transfer in nascent digital asset markets.