Crypto option trading with Bitcoin BTC and Ethereum ETH in USA

Crypto Option Trading with BTC and ETH in USA

Crypto option trading with Bitcoin BTC and Ethereum ETH are popular trading instruments but are not widely available for USA citizens.

This article focuses on explaining what crypto options are and where you can trade crypto options.

We list some of the top Bitcoin trading sites for BTC and ETH options trading.

Can you buy options in crypto?

Yes, you can trade options in crypto. However, crypto options are not listed on every crypto trading platform and are certainly not widely available for USA citizens.

 

Best Crypto Option Trading Platforms

We have listed the best crypto option trading sites in the list below.

FTX US crypto trading exchange logo
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What is Crypto Option Trading?

Crypto option trading allows you to buy or sell cryptocurrencies at a specific price within a particular date.

Crypto option trading also gives the buyers or sellers the flexibility to not buy or sell the cryptocurrency at the specified price or date.

You pay for the “option to buy or sell a certain amount of the cryptocurrency at a specific price, on a specific date, in the future.”

What is crypto option premium?

When you pay for the option to buy or sell a cryptocurrency on a settlement date in the future, you have to pay a premium to acquire the option.

Different Crypto Trading Options

There are two different types of contracts in options trading. Eith you pay for the right to buy a cryptocurrency or you pay for the right to sell a cryptocurrency. These two options are called put and call.

Call Options

Give the holder the right to buy the underlying asset at a set price (the strike price) on a set date (the expiry date).

Put Options

Give the holder the right to sell the underlying asset a set price (the strike price) on a set date (the expiry date).

Crypto Option Greeks

Crypt option traders often refer to the “Greek” expressions which are delta, gamma, vega, and theta.

They all provide different ways to measure the sensitivity of an option’s price to quantifiable factors.

  • Delta – is a measurement of the connection between an option’s premium to a change in the price of the underlying asset
  • Theta – gives an indication of how the option price will change over time
  • Vega – measures the sensitivity of the price of an option to changes in volatility.
  • Gamma – measures the rate of change in the delta for each one-point increase in the underlying asset.

American Style and European Style options

With an American-style option, you don’t have to wait until the settlement date to exercise the option. Some option contracts sold in the United States are European-style, which can be exercised only on the expiration date.

Binance has european-style options.

Crypto Option Trading Fees

There are different fees associated with crypto option trading

  • Trading fees
  • Delivery fees
  • Liquidation

Trading fees

A crypto options trading fee occurs in transactions when opening or closing a position.

The transaction fee is often based on the token and the order type (Maker or Taker).

Usually, there is an upper limit for the transaction fee of each transaction, 12.5% of the premium paid or received is a normal maximum trading fee.

Delivery Fees

There are two different outfalls on the delivery date (options expiration date)

  1. Out-of-the-money and at-the-money options will automatically become invalid at the expiry and the seller’s performance margin will be released.
  2. In-the-money options will be automatically exercised by the system at the delivery. In-the-money options buyer will receive delivery incomes and pay delivery fees, while the seller of in-the-money options will pay delivery profits to the buyer but will be free from paying delivery fees.

Liquidation fees

If the price goes against your crypto option, your positions can be liquidated. Shorted options and long options with portfolio margin mode can be liquidated. Standard long options can not be liquidated since these give you the option to buy the underlying asset at a certain price.

Cryptocurrency Options Trading VS Futures Trading

Both crypto options and futures are derivative trading instruments. 

However, there are specific essential differences to understand before entering the markets.

The significant difference between crypto options trading and crypto futures trading is that the options are “optional” while the futures contracts are “obligatory.”

For example, if you have bought a Bitcoin options contract, you also have paid a premium to be able to buy or sell Bitcoin at a specific price on a certain date.

If the price on that date is not favorable for you, you have the option to don’t take any action. After that, however, the option’s value will fall to zero.

However, in the case of a futures contract, you have signed to buy or sell the cryptocurrency at a specific price at the settlement date.

This significant difference makes options trading relatively low risk compared to futures. The maximum risk for a crypto options contract buyer is the premium, whereas the risk in a futures contract has no such limit.

Advantages and Risks of Trading Options

Advantages

  • Lower financial commitment
  • Less downside for buyers

Risks

  • Complicated trading instrument
  • Loss potential is high for sellers
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