Glossary

Options

Options are contracts that give the buyer the right, but not the obligation, to buy (a call) or sell (a put) an asset at a set price — the strike — on or before an expiry date. The buyer pays an upfront premium for this right; the seller collects the premium and takes on the obligation if the option is exercised.

For example, a trader who buys a BTC call with a $70,000 strike expiring next month, for a $1,500 premium, profits if BTC rises meaningfully above $70,000 before expiry. If BTC stays below the strike, the option expires worthless and the loss is capped at the $1,500 premium.

This asymmetry is the appeal: option buyers have limited, known downside and leveraged upside, while sellers earn steady premiums but carry potentially large risk. Option prices depend heavily on implied volatility and time remaining, not just direction, so a trader can be right about direction and still lose money to time decay. Crypto options trade on specialized centralized venues and DeFi protocols. A common misconception is that options are simply leveraged bets; they are volatility and probability instruments, and strategies exist for hedging, income, and range-bound views as well as directional speculation.