Crypto glossary
Crypto options
Crypto options are contracts that give the right, but not the obligation, to buy or sell a cryptocurrency at a set price on or before a set date.
An option has a buyer, who pays a premium, and a seller, who collects it. A call option gives the right to buy at the strike price, and a put option gives the right to sell at it. If the market moves the wrong way, the buyer simply lets the option expire and loses only the premium paid.
Deribit has long handled the bulk of crypto options volume, mainly on bitcoin and ether, and CME lists options on its crypto futures. In the US, options on spot bitcoin ETFs such as BlackRock's IBIT began trading in November 2024. Traders follow large expiries, the put/call ratio and the max pain price as gauges of sentiment.
Buying options caps the loss at the premium, but many options expire worthless if the move does not come in time. Selling options earns premiums yet can lead to large losses in a sharp move. Prices depend on implied volatility, so an option can lose value even when the market moves in its favor.
Example
A trader pays a 2,000-dollar premium for a bitcoin call with a 70,000-dollar strike; if BTC is at 75,000 at expiry the option is worth 5,000, and below 70,000 it expires worthless.
Related terms
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