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Author: Admin | 2025-04-27
Head of digital assets at tastytrade, which runs the financial network tastylive.com.How Does Crypto Option Trading Work?Crypto options are either “calls” or “puts.” Each option has an expiration date and price that the underlying asset can be traded at on the expiration date.Buying a “call” option gives you the opportunity to buy a crypto like Bitcoin at a certain date in the future for an agreed-upon price. The date in the future is known as the “expiration date,” and the agreed-upon price is known as the “strike price.”When the expiration date arrives, if the strike price of the call option is lower than what Bitcoin is trading for, you can exercise the option and make money by turning around and immediately selling Bitcoin for a profit.Buying “put” options works the opposite way — they give you the opportunity to sell an asset like Bitcoin at a given price. If you have a put option and when the expiration date comes, Bitcoin is trading at less than the put option’s strike price, you can make money by purchasing Bitcoin on the open market for a lower price and selling it through your put option for a higher price.Buying a call or put options contract gives you the right to buy or sell an underlying asset. For most option trades, however, underlying assets such as BTC or ETH rarely change hands. Since the value of the option contract itself is equal to the difference between the strike price and the market price of the underlying asset (such as BTC), most traders will just sell their option position to collect their upside.For example, if you buy a BTC call option for $1,000 (the option premium) with a strike price of $20,000 and BTC is trading for $25,000 at the expiration date, your call option will have a price (value) of $5,000. You can then use a crypto options selling platform and net a profit of $4,000. This makes trading the options themselves the preferred method due to cost efficiencies when compared with trading the underlying asset.The above examples are the benefits you receive when buying a call or put option. When selling a call or put, you will receive an option premium from the buyer, which is your immediate upside, but you are obligated to follow through on your option contract. This means you must allow the option buyer to buy the asset from you if it’s a call option or purchase the asset from them yourself if it’s a put option.It’s important to note that crypto options are different from crypto futures. Buying an option gives you the right but not the obligation to buy or sell the underlying asset, while futures require you to buy or sell the asset once you engage in the contract.Are Crypto Options Risky?Crypto’s volatility makes it risker than many asset classes, and crypto options trading can be risker than simpler crypto spot trades.When you buy a put or a call option, there’s a risk that you
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