What Is ‘Cash Settlement’ versus ‘Physical Settlement’ for Crypto Options?
Cash settlement means that upon exercise or expiration, the difference between the strike price and the underlying asset's settlement price is paid in fiat or a stablecoin. Physical settlement means the actual underlying cryptocurrency is delivered from the seller to the buyer.
Most major crypto options are cash-settled.
Glossar
Operational Challenges
Latency ⎊ Cryptocurrency derivatives markets, particularly those involving perpetual swaps and options, experience operational challenges stemming from network latency.
Cash Settlement
Settlement ⎊ Cash settlement, within cryptocurrency derivatives and options trading, represents the fulfillment of a contract obligation through a monetary exchange rather than physical delivery of the underlying asset.
Physical Settlement
Delivery ⎊ The concept of physical settlement, within the context of cryptocurrency derivatives and financial options, signifies the actual transfer of the underlying asset ⎊ be it cryptocurrency, tokens, or fiat currency ⎊ rather than a cash-based settlement.
Major Crypto Options
Classification ⎊ Major crypto options refer to derivative contracts based on cryptocurrencies with significant market capitalization and high liquidity, primarily Bitcoin (BTC) and Ethereum (ETH).