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Author: Admin | 2025-04-27
Can only be exercised on the option’s expiration date.American: Can be exercised any time before and/or on the option’s expiration date.Below is a table describing what rights each type of options contract gives:Call OptionPut OptionEuropeanYou have the right to buy a cryptocurrency on an exact date.You have the right to sell a cryptocurrency on an exact date.AmericanYou have the right to buy a cryptocurrency on any day leading up to and during an exact date.You have the right to sell a cryptocurrency on any day leading up to and during an exact date.How Expiration WorksSince crypto options are agreements to potentially trade assets in the future, there must also be a date associated with these contracts for when these trades would take place. This date is called the contract “expiry” date. In European options, if the option is exercised, it must be exactly on the date of the contract expiry. In American options, contracts may be exercised before the expiry date.For example: If you buy a European call option to buy Bitcoin at $20,000 with an expiry date on November 20th, you are allowed to purchase Bitcoin at a price of $20,000 on November 20th, regardless of what the price of Bitcoin is that day.How Strike Prices WorkOptions give the owner the right to trade crypto at a certain price at some point in the future. This price is known as the “strike price.” Call options allow you to purchase crypto at a certain strike price in the future, while put options allow you to sell crypto for a certain strike price in the future.For example: If you buy a call option for Bitcoin with a strike price of $30,000 and an expiration date of December 25th, you are allowed to purchase Bitcoin for $30,000 — regardless of what the actual price of Bitcoin is on December 25th. Inversely, if you purchase a put option with a strike price of $30,000, you can sell Bitcoin for that price regardless of what Bitcoin is actually trading for.Examples Of Buying And Selling CallsWhen you buy a call, you are buying the right, but not the obligation, to purchase an asset like Bitcoin for some price in the future. You pay a premium for this, so you start out at a loss but can make money if the price of Bitcoin at the expiration date is above the strike price + the option premium paid.When you sell a call, you collect a premium upfront, meaning you start out profitable, but you are obligated to sell the asset, such as Bitcoin, on the expiry date if the buyer of the option decides to exercise it.For example: If you sell a call option for Bitcoin on a crypto option selling platform with a strike price of $20,000, you earn a premium, but you are obligated to sell Bitcoin to the option buyer for $20,000. If the price of Bitcoin rises during the option’s lifetime, you will get a bad deal since you have an obligation
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