In the week ended June 26, the information that US$1 billion in options with maturity on such date, has created a stir in the market. The volume represented a record volume of open contracts with cryptocurrency as the underlying asset. But do you know what the bitcoin options market is? And how to invest in it?
Bitcoin options are financial derivatives that give the holder the right to buy or sell bitcoin at a specific price – known as the strike price – on a certain expiration date. The investor pays a premium – usually cheaper than buying cryptocurrency – to buy an option.
The options allow the investor to speculate on the future direction of the cryptocurrency price – either up or down. And still put together strategies to monetize the wallet or halt losses. For example, if the investor buys a put option and the bitcoin price falls below the strike price, he can sell his bitcoins at the agreed price or sell his own put option with appreciation.
Where to buy bitcoin options?
Bitcoin options have been traded on exchanges for a while, but in an unregulated manner. However, from some time now, some institutions are offering this facility in a regulated way, including CME and Bakkt. One of the largest bitcoin options buying platforms is Derebit, but there are others such as OKex, LedgerX, IQ Option and Quedex.
How do bitcoin options work?
Option contracts have two forms: call and put options. Purchase options give the buyer the right (not the obligation) to buy bitcoin at a certain strike price. While a put option offers the buyer the option to sell bitcoin at the strike price.
In short: the buyer of a call profits when the price of bitcoin is higher than the strike price and the buyer of a put profits when the price of bitcoin is lower than the strike price.
Can anyone buy bitcoin options?
Yes, anyone who goes through the KYC processes of the exchanges are able to buy options. However, it is important to note that investing in options can be very risky. Especially if the investor operates leveraged, that is, sell more options than the amount of assets he actually owns.
Recently, Transfero Swiss analyst and trader Lucas Rangel, showed how to buy bitcoin options at Fala Investidores.
