Bitcoin options – An introduction
Options are a type of financial derivatives, whose value is derived from other underlying assets. The underlying asset could be cryptocurrencies, stocks, interest rate, commodities etc.
Specifically, an option is an agreement between two parties that gives the buyer of the option the right to trade an underlying asset at an agreed price on an agreed date. For options, there will always be two parties involved — “Buyer” and “Seller”.
The buyer pays the seller a non-refundable premium at the start of the contract.
The buyer can choose not to use the option if it’s not in his favor.
The seller is required to fulfill the terms of the contract if the buyer exercises his rights.
Types of options
In all option contracts, the seller is required to fulfill the terms of the contract (obligation to sell or buy) as he was paid a premium already.
Benefits of options
As one of the most flexible derivative instruments, options can help to boost and protect your volatile crypto portfolio. Here are some benefits.
1. Enjoy limited risks and potentially unlimited returns
2. Earn income even in sideways markets
3. Versatile trading tool; trade multiple strategies
Depending on your risk appetite, you can engage in different options strategies to boost or protect your portfolio.
Learn more about options here:
- Boosting your trades with crypto options
- Make your crypto assets work for you — Sell options for weekly income
- Buy crypto options to enjoy leveraged returns
- 3 smart ways to bet on the upcoming bitcoin halvening with options
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