Definition and types of crypto options contracts

Updated: 9 March, 2023 seen 71

Recorded, edited, and uploaded the first video for Options Trading Academy - It's planned to feature about 24 such videos for a full Crypto Options Trading Course

Cryptocurrency has taken the world by storm in recent years, with Bitcoin and other digital assets gaining mainstream attention.

There are several ways to trade crypto, but for the ease of this course, we will stick with trading crypto through options contracts.

In this video lesson, we'll talk about crypto options contracts and explore the different options contract types available.

Let's start with the basics.

An options contract is a financial derivative that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price and time. 

In the case of crypto options contracts, the underlying asset is a digital currency like Bitcoin or Ethereum.

Just like in the stock market - there are two types of crypto options contracts: call options and put options.

  • A call option gives the buyer the right to buy the underlying asset at a specific price, known as the strike price, on or before the expiration date of the contract.
  • A put option, on the other hand, gives the buyer the right to sell the underlying asset at the strike price on or before the expiration date.

Buying crypto options can be a way for investors to leverage their investment and potentially earn a profit from a price movement in the cryptocurrency market.

For example, if an investor believes that the price of Bitcoin will increase in the near future, they can purchase a call option that gives them the right to buy Bitcoin at a predetermined price.

If the price of Bitcoin does increase, the investor can exercise their option and buy Bitcoin at the lower predetermined price and then sell it on the market at the higher price, earning a profit.

On the other hand, selling crypto options can be a way for investors to earn income by collecting a premium for the option.

When an investor sells an option, they are obligated to buy or sell the cryptocurrency at the predetermined price if the option is exercised. However, if the option is not exercised, the investor keeps the premium as profit.

This premium can fluctuate depending on the market conditions and the perceived volatility of the underlying asset.

In addition to traditional call and put options, there are other types of crypto options contracts available. Iron condors, straddles, collars, spreads, we will talk more about them in other lessons

Finally, it's worth noting that crypto options contracts are a high-risk, high-reward investment strategy. While they offer the potential for significant profits, they also come with a high level of risk.

It's important to do your research and understand the risks before investing in options contracts.

Interested to trade crypto like a pro? Enroll in Crypto Options Trading Course now!


Hi! My name is Reinis Fischer (38). Dad, husband, options traderdividend income investorcrypto hedge fund manager, drone enthusiast, world traveler, photographer, and passionate lover of Georgian cuisine (vegetarian). 

If you're looking to diversify your investment portfolio and explore the exciting world of cryptocurrency, be sure to check out my crypto hedge fund for opportunities that align with your financial goals