Crypto Options For Beginners

It is common to see sock traders implement Options trading but lately options trading has became a great way to make profits in crypto. So what is Crypto Options?

Crypto Options

To put it simply, crypto options is a financial instrument that allows traders to bet on the price of a crypto on a specific future date. Options gives traders the right to buy/sell a crypto at a predetermined price on or before the options’ expiration date.

There are two terms that are frequently used in dealing with options trading, Strike Price and Option Premium. Strike Price is the predetermined price of the crypto while Option Premium is the price traders pay for the option.

The volatility of cryptocurrencies gives traders a chance to speculate the strike price of a coin at a certain time in the future and pay the option premium to obtain the option.

Types of Options Trading

• Call Option

  Call option is a type of options trading that allows traders to buy a crypto asset at the strike price on or before the expiration date.

  Traders can use this method when they speculate that the market price will be higher than the strike price on or before the expiration date of the option. When the market price is higher than the strike price, the value of the call option will increase. This will ultimately leads to generating profits.

• Put Option

  Put option is a type of options trading that allows traders to sell a crypto asset at the strike price on or before the expiration date.

  Traders can use this method when they speculate that the market price will be lower than the strike price on or before the expiration date of the option. As the market price goes lower than the strike price, the value of the put option becomes higher which will lead to making profits.

Exchanges that Offer Crypto Options

Here are some of the exchanges that offer crypto option trading:

• Binance

• FTX

• OKX

• Deribit

• Bit.com

Final Thoughts

Crypto options are a great instruments to use in order to minimize your loss when trading. If your speculation is wrong, the only investment you loss is the option premium. Costs of Option premium are a lot lower than the actual price of the crypto assets, therefore, your loss is limited to them.

But you shouldn't forget that Crypto trading is subjected to high market risk so speculation on prices might be considered to be high-risk, high-reward.

Disclaimer

I am not a financial advisor. The information found here are for educational purposes and cite my personal opinion.

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