Are there bitcoin options

Bitcoin Options 2021 – Speculating on Bitcoin’s Price

Let’s talk about bitcoin options 2021. The current crypto market sees the hype around bitcoin and its inderlying technology increasing, while the traditional cryptocurrency or digital currency markets suffer due to increased inflation rates. While the price of BTC has nearly tripled within 2020, curious investors are still somewhat cautious and confused.

Imagine if you had invested in Bitcoin in 2009, when Bitcoin was trading for less than $10. Even in 2017, BTC was trading at less than $1,000. It also reached an all-time high of over $20,000 in 2017! This may have been a missed opportunity for you!

At this point in time, we have a better idea of where Bitcoin is headed. Institutions are buying. Governments are printing.

Bitcoin options – What is a trading option?

Bitcoin options is a type of derivative trading that uses a contract to lock in a price for an asset – in this case BTC. The contract is literally an “option” to buy or sell the stock over a certain period of time, which is determined by the person writing the contract or the option when they go to buy or sell it on an exchange. This is very useful when a trader or the owner of a stock share want to limit their risk.

Here’s how the process works in the stock market, where such contracts have been used for decades:

Bitcoin put contracts

There are different types of contracts when it comes to BTC options trading. The most popular is bitcoin put options contracts. Here is how they work:

Let’s suppose for a second that you buy BTC at $10000 and it rises over a six month period to $15000. You want to make sure that you keep these gains, or that your coin doesn’t lose its value and head back down to $10000.

In this case, you might purchase an options contract to sell, or a “Put” contract, that gives you the right to sell over a certain period for $14500. That means you can sell the stock at this price over the contract period no matter what the actual market value of the stock is. It may go down to $14200 on the exchange, but you could still sell it at $14500 thanks to the contract you set.

Congratulations! By investing in a bitcoin put option you have successfully limited your risk or your losses. You may hear people refer to this process also as “puts” in the plural form. For example, you can “buy puts on Bitcoin” when you sense a bearish sentiment building up.

Bitcoin call contracts

If you sense that the market is headed towards the upside, you don’t need to buy put option Bitcoin. In this case, what you need is a call contract.

Call options are essentially the opposite of put options. They give you the option to buy Bitcoin or other assets at a set price over a specific period of time. Using our example above, you could purchase a call contract to buy Bitcoin at a price of $12000 over a period of time. This $12000 target price is known as the strike price.

Why would you want to do this? Most of the time, this type of option is best for those that want to hedge risk when shorting the market. If you “short” or bet against a stock, for example, and purchase 100 shares at $100, then your risk is theoretically unlimited, because the value of the stock has no cap.

Short sellers limit their risk by using call contracts to put a limit on the value of the stock for their trade. If the stock rises again to $150, they can still purchase it at $120, limiting the potential of losing out. In your case, you could also purchase a call contract to purchase a particular stock at a particular price on a particular day.

Option contract premiums

Why wouldn’t you always pair an options contract with a trade? Simply said, those that write the contracts (sellers) require you to pay a premium to buy them. Their bet is that the options contract will go unused and they will just “capture” or make money on the premium, which you have to pay when you purchase the contract. It is a fee of sorts, seen in both bitcoin call put options.

The value of the premium you have to pay to purchase a contract changes as the option gets closer to its expiration date, or in other words, as more information can be gathered about what the price will be as the option ends and the owner must decide whether or not to use it.

Bitcoin options – call, put, and earning $$

The options market allows us to also make certain predictions about the direction of a particular asset. The simplest way to understand this is by using the number of puts to call options or the “Put to Call Ratio” PCR. This is a simple calculation that expresses the confidence of sellers that the price of a stock (or crypto), in general, is headed in one direction or another.

Remember that sellers are betting against the buyers, and are trying to make sure their options go unused so that they can capture the premium at which they sold the contract.

Threshold framework

PCR ratios can be used only when paired with “bands” or thresholds that are set to tell a trader that a movement is taking place. In other words, a PCR doesn’t mean anything unless you set up a framework to interpret it.

For example, Put options are used more frequently by institutional investors to hedge risks on long-term investments, so what would it mean if the PCR suddenly collapsed? Is a movement taking place? These are the things that a framework can help you decide.

Bitcoin options examples

Let’s say that 100 BTC on January 1st, is worth $7000 / BTC. You have a debt that can only be paid in 100 BTC on March 2nd, and you expect the price of BTC to go up, so you purchase a 3 month, American style options call contract, expiring on March 1st. The strike price for the contract is $8000 / BTC, and the premium is $50000. On March 1st, you look and see the price of BTC on some popular trading platforms is $10,000 / BTC and decide to exercise your option and pay your debt.

Your cost:

$800,000 + $50,000 premium = $850,000. BTC cost: $10,000 = you save $150,000 on the trade.

BTC put options example

In the same way, we can examine the cost of a call option. You buy 100 BTC on January first, for $7000/ BTC. You expect heavy volatility in the market and purchase a put option to sell your BTC for $10,000 / BTC with a $150,000 premium, expiring on March 1st. The price on March 1st is $8000 / BTC, so you exercise your option and sell the BTC for $1,000,000 to the contract writer on a regulated exchange.

Your cost:

$700,000 BTC cost +$150,000 premium = $850,000, sold for $1,000,000. You profit $150,000 on the trade.

Bitcoin options 2021

The options market is a way to limit risk for your investments and assets and to purchase or sell bitcoin options. When someone asks for more information simply explain to them what you learned in this article. Bitcoin options are relatively new but are rapidly expanding, as more and more investors are entering the speculative market.

Don’t worry if you feel like you’ve missed the boat! Gains can still be made if you’re smart about playing the options markets, especially if the price is volatile and unpredictable. Increased volatility doesn’t have to be a bad thing! Use bitcoin futures products, bitcoin futures contracts, or bitcoin options to increase your profitability.

By using our platform, you can use traditional options trading to maximize your returns and ride the trend lines.

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Are There Options for Bitcoin?

Options Bro

With Bitcoin making new all-time highs seemingly everyday, the hype and buzz about the digital currency is palpable. Naturally, as more participants join the BTC movement and the market becomes more volatile, a lot of traders have been wondering if there’s a way to hedge or speculate by buying/selling BTC options.

Can You Trade Options On Bitcoin?

Technically, the answer is yes. As of the current moment, you can trade bitcoin options, but it’s not yet regulated in the United States. Deribit is the only liquid options exchange for bitcoin in the world.

Be warned, however, because deribit has seriously wide bid/ask spreads, although they’re narrowing everyday. We conducted a full review of the Deribit platform here.

In 2015, the Commodities and Futures Trading Commission (CFTC) banned Deribit from operating in the US due to a lack of adherence to regulatory procedures.

What a Bitcoin Option Chain Looks Like

Currently, options for BTC function exactly like options for stocks or futures.

The only major difference is the huge implied volatility and outrageously wide BID/ASK spreads. Current implied volatility for August BTC options is 120%! That’s crazy high!

When bitcoin was trading at $3,500 in August of 2017, the BID/ASK spread use to be $220.26 by $296.10. Now, bid/ask spreads are far more narrow. See for yourself on Deribit’s platform. It’s free to signup, and if you’re from the US, you can circumvent the “ban” by saying you’re from Canada. There is no verification process.

Because Bitcoin has had very wild price swings, high levels of implied volatility make sense. What this tells us is that market participants are uncertain about the direction that BTC will trade, and by how much it will trade in said direction. Hence, they are willing to pay a premium (high implied volatility) to protect their positions.

However, because these option prices are generated by an unregulated cryptocurrency exchange, it cannot be in essence fully trusted. Put it this way, no institutions are trading BTC options with these unregulated exchanges popping up left and right, it’s mainly unsophisticated retail investors.

Regulated Options for BTC Are Coming Very Soon

Due to the immense surge in popularity of cryptocurrencies in general, LedgerX was recently approved to become the first regulated digital currency options exchange and clearinghouse in the United States. They currently offer some bitcoin options and swaps, but if you think Deribit’s spreads are bad, LedgerX’s will give you a heart attack. It’s basically not tradable.

This is a huge deal for all cryptocurrency traders, especially bitcoin and ethereum.

LedgerX is based in NYC and is backed by Alphabet Inc’s venture capital division.

They’re one of the leading innovators in derivatives trading for cryptocurrencies, and in the future, they will likely be a big player in the bitcoin derivatives world.

Being able to buy and sell options on major cryptocurrencies like BTC and ETH via a US regulated exchange is a huge deal.

This is exactly how stock options started out in the US, especially weekly options, and they quickly became one of the fastest growing financial instruments, in terms of popularity, in the world.

Futures are Finally Here

Having just approved options for BTC in August, the CFTC has approved futures and they will begin trading on Sunday December 10th, 2017 at 5pm CT. Read all about how to trade bitcoin futures.

tastyworks is the cheapest and best brokerage firm that offers bitcoin futures trading to their clients. Unlike TD Ameritrade, there is no $25,000 account minimum to trade bitcoin futures. Trades start at just $1.25 per contract!

Bitcoin futures give traders a way to speculate and hedge with BTC virtually 24/6 without ever having to actually convert USD to BTC. Like the approval for options trading, the fact that futures trading for Bitcoin is in the works is also a huge deal.

Deribit also offers bitcoin futures, but these are very different that regulated BTC futures on the Cboe or CME.

The more ways there are to trade BTC, the more opportunity there is. It’s just that simple.

So You Want To Trade Bitcoin Options?

If you’re willing to take a small risk, you can try trading bitcoin options with Deribit, but exercise caution. As for bitcoin futures, if you’re going to trade those, stick with tastyworks, since they are FDIC insured and regulated.

As cryptocurrencies begin to catch grow in popularity, we eventually foresee a world where they will be heavily traded by institutions and retail investors alike around the world. The fact that futures and options trading will now be permitted and regulated in the US for Bitcoin is a massive step in the right direction for the future of all digital currencies.

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Tips on How to Trade Bitcoin and Cryptocurrency Options

The fact that there are cryptocurrency options on the market in the first decade of crypto’s existence represents incredible diversification and cryptocurrency commerce. Many people first heard of cryptocurrency in late 2017, when Bitcoin was soaring and breaking price records every week. Therefore, cryptocurrency options are yet another milestone in the development curve of Bitcoin and other cryptocurrencies. However, before we dive into what options are, let’s first take a look at what derivative contracts are.

What Is an Options Contract?

Options are a type of derivative, a derivative contract in this case being an agreement about an underlying asset – a digital asset, stock, bond, etc. – that is traded on the market as a unique product but whose value is contingent on the performance of that asset.

To cut to the chase, an options contract is a derivative instrument that gives the buyer or the holder the right but not the obligation to either buy or sell the underlying asset at a preset price within a given period of time. The right to buy is the call option, and the right to sell is the put option. Furthermore, when the options contract lacks special features or terms, it is called vanilla. If it is laden with special structures, terms, and conditions, then it is an exotic option. All in all, an options contract offers its holder versatility and is often used to hedge or speculate on underlying asset prices.

To a beginner investor, options are obviously a little complicated and seem more complex than spot trading. This is why they are underused. However, with the proper understanding, they can be very lucrative derivative instruments, albeit expensive if the underlying asset is volatile. These are the associated key terms used in cryptocurrency options trading:

Call: If you are bullish on a cryptocurrency, expecting prices to rise, then you should buy a “call” option. In this arrangement, you exercise your option by buying at the strike price even if prices are higher. Generally, traders buy a call option if they are confident about the cryptocurrency’s future.

Put: If, on the other hand, you are bearish, expecting the prices of a digital asset to tumble, then you can speculate on the future of the cryptocurrency by buying a “put” option. This option allows you to sell the cryptocurrency at the strike price even if prices are lower.

Strike Price: This is the price at which the holder of the option can buy (in a call option) or sell (in a put option) the underlying asset, IF they choose to exercise their option. In a call option, the trader will be “in the money” if the spot price of the underlying asset is higher than the strike price. Conversely, in a put option, the trader will profit if the spot price of the underlying asset is lower than the strike price.

Premium: This is the price the holder pays to own the option. It is based on several factors, including the volatility of the underlying cryptocurrency, the expiration period, and the spread between the current price and the strike price.

Maturity: The maturity date of an option is its expiration date. It is the last date by which the option must be exercised before the right to buy (in a call option) or sell (in a put option) expires. In cryptocurrency options trading, the maturity date is fixed. There is no point in exercising options that are out of money. In such a scenario, one will only lose the premium, or the money paid to secure that option.

Trade Date: This is the date on which the option order is executed on the market, if the holder decides to exercise the option.

Delivery Date: If the option is on the money and exercised, then the date on which that option is realized or finalized is the delivery, or settlement, date.

Bitcoin Options Contracts

A Bitcoin options contract derives its value from Bitcoin, which acts as the underlying asset. Like all Bitcoin derivatives, Bitcoin options have the potential to be incredibly profitable because of Bitcoin’s volatility. Needless to say, however, this volatility comes with risk. A Bitcoin options contract gives its holder the luxury of a right but not an obligation, as would be the case with Bitcoin futures contracts.

A Bitcoin put option grants the holder the right to sell Bitcoin at the stipulated price when the predefined time arrives, while a Bitcoin call option gives the holder the right to buy Bitcoin at the stipulated price.

For example, a user may speculate that the price of BTC will reach $20,000 in two months. They can buy a Bitcoin options at a fee with the stipulated strike price in two months. If they place a Bitcoin put option, they get the right to sell at the strike price upon expiry of the contract. Investors need to pay a premium price for Bitcoin options, and they can leverage them by purchasing a large number of options to profit, should the options end up being profitable. Should the contract expire below the strike price, however, they can record losses. This is a simplified version of events, but it serves to explain the general layout of a Bitcoin options contract.

Why should investors trade with Bitcoin options? These are some advantages of dealing with Bitcoin options:

1. Options are better than futures for options buyers, as their maximum loss is limited by the premium. For sellers, the maximum profit is limited by the premium, whereas the loss is unlimited. So, this works as a guarantee.
2. Options are the most flexible financial instruments, as they can be used to emulate the behavior of futures (so called “call-put parity”) and implement complex strategies like butterflies, straddles, strangles, and more.
3. They are leveraged.
4. You can get exposure to pure volatility without taking up directional position risks by using delta hedging.
5. Bitcoin and cryptocurrency options trading is legal in the US and other countries where offering companies have the required licenses.

Ethereum (ETH) Options

Similarly, Ethereum options have ETH as their underlying asset, allowing users to hedge or speculate on the price of Ethereum.

Deribit and a few other platforms are notable players in this market. Xena Exchange will begin offering options trading from Q1 2020. Plans are underway, and there are already tons of educational materials related to cryptocurrency derivatives products and guides on how to trade successfully.

Given that the size of the crypto options market in general is still quite small, it is logical that Ethereum options are only a tiny fraction of the overall crypto derivatives scene.

Trading Bitcoin Options

First, it is important to mention that not all Bitcoin options are the same. You can exercise American-style Bitcoin options at any point in their lifetime. On the other hand, European options can also be traded at any time during their lifetime but can only be exercised upon expiry. In the trading scene, all information is vital, hence the distinction.

The basic question is how to buy Bitcoin options. In the market, it is recommended that traders settle for a reputable platform with a proven track record of customer satisfaction, like Xena Exchange. There are a number of options available, and investors just have to choose the options that best fit their investment needs.

A Bitcoin options contract that suits your investment needs is great. Once you find one, you can purchase call or put options of your choice for a premium fee, often priced in BTC. The mode of settlement can vary. Most exchanges settle in BTC, with BitMEX and OKEx as examples.

Here is a summary of popular exchanges offering options:

Exchange	Fees	Leverage
Deribit	0.04% of the underlying contract	Up to 10X
Binance JEX	0.10 to 0.20% maker’s and taker’s fees, JEX Token 50% Off	Up to 25X
LedgerX	$10 withdrawal fee	Up to 10X
CME	TBA	TBA
Quedex	0.03% taker’s fee	Up to 10X

Trading Bitcoin options involves keeping an eye on the price of the option, the strike price, and the maturity. This way, you ensure that you buy the right Bitcoin options. At this level, you will have already encountered many terms, including “delta” and “implied volatility.” Therefore, if you decide to buy an options contract, you need a decent amount of options knowledge.

Bitcoin options differ from futures in certain ways because when buying a call or put option, you limit your losses to the premium. Options are therefore better for hedging, especially for “participants who have large portfolios on their balances,” according to Alexey Markov, a Moscow-based options trader. This is why they can be complementary to other, riskier investments, like futures, in any given portfolio.

Bitcoin options trading strategies are sophisticated. Let’s take the example of a BTC call option, where you have the option to buy BTC at the expiry date at the strike price. Logically, you would want the price of BTC to go up because the higher it goes, the more your call option is worth.

Bitcoin volatility has an impact on Bitcoin options. Usually, when volatility increases, the options price increases as well.

Bitcoin Options Exchanges and Useful Tips

Different exchange platforms have different options offers. Bitcoin options exchanges are obviously not as numerous as mainstream spot cryptocurrency exchanges because options trading is not as simple as spot trading.

Investors are therefore likely to look at certain factors when picking the right exchange. These include the range of trading options available, the trading fees, the customer support, and the kind of user interface on the exchange dashboard, among others.

In cryptocurrency circles, exchange security is obviously a consideration, given the lucrativeness of digital assets and the devastating recent hacks. Ever since mainstream financial marketplaces like CME (Chicago Mercantile Exchange) begun to offer Bitcoin futures in 2017, the crypto derivatives market has continued to grow.

Xena Exchange will begin offering options trading from Q1 2020. Accordingly, Xena Exchange provides information about all aspects of derivatives trading to ease investors’ entry into this market. The contract trading sector is dynamic, and exchanges like Xena Exchange are at the forefront of this diversity of crypto commerce.

The information provided in this article does not constitute investment advice.
Remember that trading cryptocurrencies comes with significant risks. You may suffer considerable losses and may potentially lose more than you have invested. No tool can guarantee future profits or predict market movements with absolute precision.
The company is not responsible for any damages or losses that occur in connection with the use of the information contained in this article.

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