How Do Call and Put Options Differ in Purpose and Function?
Call and put options serve opposite market expectations. A call option gives the holder the right to buy a cryptocurrency at a specific price, making it profitable when the asset's price increases above the strike price.
Traders buy calls when they are bullish, anticipating a price rise. Conversely, a put option provides the right to sell a cryptocurrency at a set price, becoming profitable as the asset's price falls below the strike price.
Traders use puts when they are bearish, expecting a price decline or to protect their existing holdings from losses.
Glossar
Put Option
Insurance ⎊ Purchasing a Put Option functions as a form of portfolio insurance, establishing a guaranteed minimum selling price for the underlying crypto asset.
Call and Put Options
Derivative ⎊ Cryptocurrency options, representing financial contracts derived from the value of underlying digital assets, introduce a layer of complexity beyond spot trading.
Right to Sell
Exercise ⎊ A right to sell, within cryptocurrency derivatives, represents a contractual obligation granting the holder the option, but not the requirement, to divest an underlying asset at a predetermined price on or before a specified date.
Call Option
Entitlement ⎊ The core of a call option within cryptocurrency derivatives represents a contractual right, but not an obligation, to purchase a specified digital asset at a predetermined price, known as the strike price, on or before a specific expiration date.
Right to Buy
Exercise ⎊ The ‘Right to Buy’ within cryptocurrency derivatives contexts denotes an option holder’s prerogative to acquire an underlying asset at a predetermined price on or before a specified date, mirroring traditional financial options but applied to digital assets or synthetic representations thereof.