What Is a Crypto Option?

A crypto option is a financial contract that gives the buyer the right, but not the obligation, to buy or sell a specific cryptocurrency at a predetermined price within a set time frame. This derivative allows traders to speculate on future price movements or hedge against potential losses without owning the actual digital asset.

There are two main types: call options (the right to buy) and put options (the right to sell). The price paid for this right is called the premium.

Sellers of options are obligated to fulfill the contract if the buyer decides to exercise it.