How Does the Concept of 'Cost of Carry' Affect the Pricing of Long-Term Crypto Options? ▴ Learn

How Does the Concept of ‘Cost of Carry’ Affect the Pricing of Long-Term Crypto Options?

The cost of carry includes the interest rate and any cash flows like staking rewards or dividends. For long-term options, a higher cost of carry (e.g. high stablecoin lending rates) increases the price of call options and decreases the price of put options.

This is because the forward price, which is used in option pricing, is higher due to the cost of carry.

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