Cryptocurrency Options: How It Works


How are cryptocurrency options arranged

Technically, cryptocurrency options are designed like any other. The main difference is due to the lack of regulation of cryptocurrency space. At the moment, many leading financial institutions consider digital currencies new, untested, and unstable. As a result, trading in crypto tools – including options – largely remains outside the investment and financial mainstream.

And yet cryptocurrency options do exist. And they give investors a new, potentially profitable way to participate in the cryptocurrency market.

Benefits of Options Trading

The option gives the investor the right to buy or sell cryptocurrency at a predetermined price for a certain period. It is important that the option does not oblige you to buy or sell, but rather makes it possible to complete a transaction at any time before the expiration date. In traditional financial markets, options are used to limit risk and make a profit.

Option buyers hope that the price of the asset will rise or fall by the deadline. It is important that potential losses are limited by the amount of premium paid.

How cryptocurrency options work

Options trading is different from cryptocurrency trading. In normal trading, an investor can buy or sell coins and tokens at any time. Obviously, he hopes to sell cryptocurrency more expensive than he bought. Options are different.

They operate for a limited, predetermined period of time. And the price of the underlying asset is already fixed. Depending on the position, the investor hopes that the cryptocurrency will rise in price or become cheaper in relation to the set price.

This should happen before the option expires. Now that you know the basics, let’s move on to some important concepts and concepts from the world of options that you need to know.

Call option

The call option gives the owner the right to buy cryptocurrency at a predetermined price before the deadline. When buying a call, the investor hopes that the cryptocurrency will rise in price in the allotted time period.

If this happens, he can buy it at the option price (which in this case will be lower than the market price) and immediately sell it on the stock exchange at a higher cost.

Put option

Unlike the call option, put gives the owner the right to sell the cryptocurrency at a predetermined price for a certain period.

In this case, the investor hopes that the cryptocurrency will become cheaper. If this happens, he will be able to sell it at a price much higher than the market, making a profit.

 The future of cryptocurrency options

It is important to note that some exchanges already offer crypto options. However, the digital currency derivatives industry is still at an early stage of development. As interest from influential financial institutions such as Goldman Sachs (the bank is exploring the possibility of creating cryptocurrency securities) grows, one can expect an increase in the availability and prevalence of cryptocurrencies.


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