OKX Options Introduction
1. What are options?
Options are derivatives that give the contract holder the right, but not the obligation, to buy or sell a specified quantity of an underlying asset at a specified strike price on a specified date in the future.
- The contract holder (buyer) can choose to exercise the option if he or she can benefit from doing so, and the contract writer (seller) will have to pay the relevant amount to the contract holder.
- If there is no benefit from exercising, the buyer can choose not to exercise it, and then the seller does not need to pay anything.
Here are some basics of options:
Underlying asset: asset for trading on which derivatives contract’s price is based. For example, the underlying asset of Bitcoin options is BTC/USD index. OKX offers options on the underlying of Bitcoin, Ethereum.
Expiration date: the date on which options expire.
Strike price (or exercise price): the price at which the option holder can buy or sell an underlying asset when exercising a call or put option respectively.
Contract type: Call options give the holder the right to buy at a specified price while put options give the right to sell at a specified price.
Exercise Style: American Options can be exercised at any time prior to its expiration date. European options can only be exercised on its expiration date. OKX Options are European options.
Option premium: the price at which an option is bought or sold.
Options can be classified into in-the-money (ITM), at-the-money (ATM) and out-of-the-money (OTM), depending on the difference between the strike price and the price of the underlying asset.
| Contract Type | Relationship between S (final settlement price) and K (strike price) | ITM/ATM/OTM |
|---|---|---|
| Call options | S>K | ITM |
| S<K | OTM | |
| S=K | ATM | |
| Put options | S<K | ITM |
| S>K | OTM | |
| S=K | ATM |
2. OKX Options Contract Specification
| Contract Type | Call and Put | |
|---|---|---|
| Exercise Style | European options | |
| Contract Expirations | 1, 2, 3 dailies 1, 2, 3 weeklies 1, 2, 3 monthlies 1, 2, 3 quaterlies of the March, June, September and December cycle. For details, please click the Introduction to Options Expiration Dates |
|
| Underlying Asset | BTC/USD Index | ETH/USD Index |
| Contract Size | 0.01 BTC per contract | 0.1 ETH per contract |
| Settlement Coin | BTC | ETH |
| Tick Size | 0.0001 BTC or ETH for options with prices under 0.005 BTC or ETH; 0.0005 BTC or ETH for options with prices above 0.005 BTC or ETH. |
|
| Mark Price | Determined by OKX using the Black model on a real-time basis. Implied volatility is derived from market data, along with the volatility cap and floor. | |
| Creation Time | Options with new expiration date are created at 8:30 UTC. | |
| Expiry Time | 08:00 (UTC) on the expiration date | |
| Settlement Price | Time-weighted average price of the index price during the last one hour before expiration. (The snapshot of the index price is taken at 200ms interval) Please refer to option settlement price history. |
|
| Exercise Methods | Cash settled; ITM options are automatically exercised and settled at expiration | |
| Trading Hours | 24x7 | |
| Trading Fees | Please refer to fee rate table | |
| Contract Naming | Named in order of “underlying asset – expiration date – exercise price – type” | |
| Position Limit | Please refer to Option Position Limit | |
| Price Limit | Please refer to Price Limit | |
3. Comparisons between OKX options and futures
| Comparisons | OKX options | OKX futures |
|---|---|---|
| Rights and obligations | The buyer has the right, but not the obligation, to buy or sell the underlying asset after paying the premium. The seller has the obligation if the buyer choses to exercise. |
Both the buyer and the seller are obliged to settle a futures contract. |
| margin requirements | The option contract seller has to pay a margin. The buyer only pays a premium, but no margin*. (*not applicable for Portfolio Margin) |
Both the buyer and the seller have to pay a margin to open a position. |
| potential risks | The potential gain from buying an option contract is unlimited, and the loss of a buyer is only limited to the premium paid. However, the potential loss of selling an option is unlimited, but the profit of selling is limited to the premium received. | The potential gains or losses for both buyers and the sellers are unlimited |