How do crypto options and derivatives work?
An option is a contract that gives its holder the right to buy or sell an asset at an agreed price up to an agreed date, without the obligation to do so. A call is the right to buy and a put is the right to sell, the agreed price is the strike, and the amount paid for the contract is the premium. Options are priced largely on how much movement the market expects before expiry, which is what implied volatility measures.
Derivatives are the most technically demanding subject on this site and they carry the sharpest risk, because a contract can expire worth nothing and a sold option can lose far more than it earned. The pages below explain the mechanics precisely so that the risk is visible rather than implied.
Options and derivatives terms explained
9 definitions, each with a plain-English version, a technical version, a worked example and the mistakes beginners make.
Where this is taught
This subject sits in the Expert path of the CryptoBipto curriculum, which runs from complete beginner to expert across four tiers. You can browse the full curriculum or read free sample lessons before signing up.
Common questions
What is the difference between an option and a futures contract?
A futures contract obliges both sides to settle at the agreed terms. An option gives one side a choice and the other side an obligation, and the side with the choice pays a premium for it.
Can I lose more than I paid for an option?
If you buy an option, the most you can lose is the premium you paid. If you sell or write one, your loss is not capped in the same way, which is why selling options is treated as an advanced activity.
What does implied volatility tell me?
It is the amount of movement the market is currently pricing into the contract. High implied volatility makes options more expensive, so a correct view on direction can still lose money if the expected movement was already priced in.
Related subjects
Educational only — not financial advice. CryptoBipto does not custody funds or execute trades.