Crypto Options Trading Explained: A Comprehensive Overview for Investors

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Options, like futures, are derivatives that track the price of an underlying asset. However, unlike futures, options give the buyer the right, but not the obligation, to buy (i.e., call options) or sell (i.e., put options) the underlying asset at a specific price on or before a certain date, called the expiry. For traders, options can serve as an effective tool to fulfill various investment objectives of their portfolio, such as:

  • Limit downside losses in a declining market.
  • Generate profits in periods of high volatility.
  • Speculate on price movements with relatively low risk.

While futures are more popular, cryptocurrency options are gaining traction and are offered by leading cryptocurrency exchanges like OKX. Inexperienced traders may avoid trading crypto options because they believe them to be overly complex. OKX’s Simple Options product is the perfect introduction to the subject. If you want to learn to trade BTC or ETH options, this is the place to do it. 

Features of OKX Simple Options 

Simple Options contracts are exactly the same as those traded in the more advanced Pro Mode. However, a simplified user interface, recommended mark prices and risk disclaimers make it easy for beginners to understand trading crypto options. Additionally, you cannot sell options contracts in Simple Options because selling options has potentially unlimited downside risk.  

OKX facilitates the trading of BTC and ETH options contracts. Particulars to note in terms of crypto options on OKX are:

  1. Call and put options contracts are available for trading.
  2. Contracts expire on one-day, two-day, weekly, bi-weekly, monthly, quarterly and bi-quarterly time frames.
  3. Contracts follow the European style and can only be exercised at the date of expiry (and not before).
  4. Contracts are settled at 8:00 am UTC on Friday of the expiry week.
  5. Contracts are traded 24/7.
  6. Each options contract enables the holder to buy or sell 0.1 BTC or 1 ETH at expiry. 

How to trade Simple Options on OKX

Step 1: Navigate to the Options section

From the OKX homepage, navigate to Trade in the top menu. Then, click Basic trading

Under the Market section, click the trading pair at the top and then the switch button to group trading pairs by instrument type. 

Then, select Options

Step 2: Choose BTC or ETH Simple Options

When accessing the Options section, simple mode should be selected by default. If not, click Simple Mode.

Next, click choose either BTC Simple Options or ETH Simple Options.

Step 3: Choose a direction

Next, select the direction in which you believe your chosen asset will move by clicking the up or down arrow. If you choose up, you’ll be buying a call, and if you choose down, you’ll be buying a put option. 

Step 4: Choose an Options contract

On the next screen, you’ll see various recommended contracts. On each contract, you’ll see the price at which you agree to buy or sell the underlying asset — or strike price — and the date on which the contract will expire.

To make it easier for beginner traders, we categorize each contract by duration and risk. For example, the first contract in the image below is classified as “Short Term” and “High Risk.” Also included is the option’s premium, which will fluctuate as the asset’s spot price moves. 

At the time of writing, BTC price is $47,548, and the first recommended call option will expire in just over 48-hours, giving its holder the right to buy BTC at $49,000. The suggested price indicates that entering into that contract will cost around $174 — you’ll be asked to specify an exact premium later. 

Suppose you bought 10 contracts enabling you to buy 1 BTC at expiry, and the price increased to $53,000. Exercising it would enable you to buy 1 BTC cheaper than the current market rate. If you were to sell the BTC bought immediately, you would profit around $3,826 (minus platform fees) — the difference between the price at expiry and the strike price added to the premium. 

If the price at expiry had fallen to $47,000, the contract would expire worthless because it makes no sense to exercise your option to buy BTC for $49,000 when the spot price is lower. However, since you do not have an obligation to buy, your loss is limited to the option premium. 

Choose a contract from those recommended, or use the dropdown menu to select from other call contracts. 

Step 5: Enter the contract details

On the following pop-up, select whether to buy your option in the underlying asset or USDT. The “Recommended Price” field refers contract’s price assuming you are attempting to buy a full unit of the asset — i.e., 1 BTC or 1 ETH. The “Amount” field is where you enter the amount of the asset you actually want the option to buy at the expiry. The “Estimated cost” field will fill automatically based on the price, and the amount entered. 

When you’ve entered your order details, click Confirm to submit. 

Step 6: Check your position

You can check on an open options position at any time by navigating to Trade and then clicking Basic trading. You’ll see the order history section at the bottom of the main trading screen. If your order has not been filled yet, it will be on the “Open orders” tab. If it has been filled, the order will be in the “Positions” tab. 

Step 7: (Optional) Close position

Your option will settle automatically, and any profit at expiration will be paid into your account in either USDT or the crypto asset traded. 

You can also close a position manually before the expiration date. Just visit the order history section and find your position. Then, enter the amount and price, and click Close. This will place a limit order to sell the option at the specified price. 

Alternatively, you can use the MKT Close All button to immediately exit your entire position at the current market price. It’s worth bearing in mind that this method will involve you paying a higher trading fee since you will be a taker in the market rather than a maker. You can check a more detailed breakdown of the OKX fee structure in this article.  

You can also reference these support center guides if you’d like to learn more about the specifics of crypto options trading at OKX. 

Not a part of the OKX community? Sign up to get started trading Simple Options today.