What are digital options also known as?

Digital options are commonly referred to as binary options because they provide a fixed payout if a certain condition is met at expiration, typically based on whether the underlying asset is above or below a specified price level. The term "binary" reflects the two possible outcomes: either the option expires in-the-money, resulting in a predetermined payout, or it expires out-of-the-money, resulting in no payout at all.

This characteristic of having only two possible outcomes is what differentiates binary options from traditional options, which can have varying degrees of payoff dependent on how much an asset has moved in price. The straightforward nature of binary options makes them appealing for speculators who want to bet on price movements without dealing with the complexities of other option types.

In contrast, fixed return options and variable options do not accurately describe this unique payout structure, and bivariate options pertain to a different concept related to the correlation between two variables in financial modeling. Hence, the correct term for digital options is binary options.