Option Margin: This is the asset that you must hold in your account in order to sell an option. Portfolio Margin: In order to determine the margin required to sell an option, platforms may look at your portfolio margin, which is simply the risk profile of all your portfolio assets taken together. For example, if you want to sell a BTC call option, the underlying BTC that you promise to sell to the buyer if the option is exercised is known as the option margin. This is known as unified margin. Unified Margin: Many platforms will provide margin trading options that allow you to leverage your positions across all assets rather than just levering up on a single asset.

Fidelity Crypto Trading

Puts: Give you the ability to sell a cryptocurrency at some future date for a predetermined price. This date is called the contract “expiry” date. Since 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. American: Can be exercised any time before and/or on the option’s expiration date. In European options, if the option is exercised, it must be exactly on the date of the contract expiry. European: Can only be exercised on the option’s expiration date.

Put options have been described as a form of portfolio insurance. When volatility is high, options are expensive and when volatility is low, options are cheap. The implied volatility of an option can be used to value the option. Earn Through Volatility: Each option has an “implied volatility” factor which is calculated using an option pricing model that takes into account its strike price, expiration date, and price premium. If you believe that the implied volatility is low or cheap relative to the actual volatility of the underlying asset, you can buy the option and make the bet that volatility will increase.

At their core, crypto options are “derivatives” of cryptocurrency assets – meaning they derive their value from the underlying cryptocurrency. ETH, at some point in the future for a certain price. Each option has a price, known as a “premium,” that is normally a fraction of the price of the underlying asset. Options can either be bought or sold, depending on what side of the trade you want to take.

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. When 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.