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.
Glossar
Crypto Options
Volatility ⎊ Crypto options, within the cryptocurrency derivatives landscape, represent contracts granting the holder the right, but not the obligation, to buy or sell a specified cryptocurrency at a predetermined price on or before a specific date.
Price Movements
Momentum ⎊ Within cryptocurrency derivatives and options, momentum describes the rate of change in price, reflecting investor conviction and potential for sustained directional movement.
Predetermined Price
Benchmark ⎊ This price functions as the fixed reference point, or benchmark, against which the current market price of the crypto asset is measured to determine the option's intrinsic value.
Financial Contract
Definition ⎊ A financial contract is a legally binding agreement between two or more parties that specifies the terms and conditions for a future financial transaction, often involving the exchange of assets or cash flows.
Call Options
Derivative ⎊ Cryptocurrency call options represent a standardized contract granting the holder the right, but not the obligation, to purchase an underlying cryptocurrency asset at a predetermined price (the strike price) on or before a specific date (the expiration date).
Option Seller
Strategy ⎊ The Option Seller, within cryptocurrency derivatives, fundamentally assumes a short position, profiting from a decline in the underlying asset's price or volatility.