How Do Options Contracts Typically Settle Compared to Futures?
Options contracts, particularly those on cryptocurrencies, can be settled in two ways: physical or cash. American-style options are typically physically settled upon exercise, meaning the underlying asset is exchanged.
European-style options are often cash-settled upon expiration, where the difference between the strike price and the final settlement price is paid in cash or a stablecoin.
Glossar
Final Settlement Price
Valuation ⎊ The Final Settlement Price in cryptocurrency derivatives represents the agreed-upon value of the underlying asset at contract expiration, crucial for determining payouts in options and futures.
Volatility
Measurement ⎊ Volatility, in quantitative finance, is the statistical measurement of the dispersion of returns for a given financial asset, typically quantified by the annualized standard deviation of its price movements.
Options Contracts
Derivative Instruments ⎊ Options Contracts are agreements granting the holder the right, but not the obligation, to buy or sell a specified quantity of an underlying asset, typically a cryptocurrency, at a fixed price within a set timeframe.
Options Clearing Corporation
Entity ⎊ The Options Clearing Corporation (OCC) functions as the primary clearing entity for equity options, foreign currency options, and various other derivative products in the United States.
Underlying Asset
Futures Pricing incorporates the cost of carry, which in crypto markets includes funding rates derived from perpetual swap markets and the time value associated with holding the spot asset.
Strike Price
Reference ⎊ The Strike Price is the predetermined reference level set at the contract's inception against which the underlying crypto asset's spot price is compared at expiration or exercise.