What is a crypto option?

Crypto options are a type of derivative contract agreement that gives the holder the right (i.e., the option), but not the obligation, to buy or sell a specific underlying asset (such as a cryptocurrency) at a set price (referred to as the strike price) up until a set future date (also known as the expiry date ).

When should a crypto option holder exercise their option?

At any time before the expiry date, the crypto option holder can decide whether or not to exercise their option. A major factor affecting this decision is usually where the market price is in relation to the strike price — this determines whether a profit or loss is made from exercising the option.

What is the largest crypto options market by volume?

Deribit: This is the largest crypto options market by volume. It’s a BTC, ETH options market and only executes contracts at expiration. It settles options contracts in cash by crediting contract owners the cash equivalent of the underlying assets. It also offers up to 50 times leverage for option traders.

What is a crypto derivative?

A derivative is a tradeable financial instrument that derives its value from an underlying asset, such as a cryptocurrency. It allows traders to get exposure to the price movement of an asset without actually owning it. The two main types of crypto derivatives are futures and options.