What are futures and options in Crypto trading?
Crypto futures are nothing but future contracts that are actually standard versions that are meant to buy and sell the currency in the Crypto market at a specific contract size and at a particular date and time. The future contracts are usually traded in the Future exchange markets across the entire world, like the CME group. We mostly use the Crypto futures for the purposes of hedging and speculations.
Crypto options are derivatives that are dependent upon the underlying currency pairs. Crypto options trading involves a lot of effort and strategies. The choice of strategy entirely depends on the choice of option, brokers and platform used. There are two different variations of the Crypto option: Vanilla and Spot Option. The Crypto options actually involve some physical assets. Crypto options, you have the complete discretion and flexibility to choose the price and expiry date of the Crypto options, unlike Crypto futures that are contract bound.
A Few of the terms involved in Crypto options:
- The call option is the right of a trader to buy the asset at a fixed date and price.
- The put option is actually the right of the trader to sell the asset at a fixed date and price.
- The strike price is the price of the asset upon which the investor is actually exercising the option.
- The spot price is the actual price of the same asset at the time of the trade.
- The expiration date is the time within which the option is valid, and the varied expiration date valuations are varied as well.
In the case of options of eth, the currency valuation stands at 1 BTC equals 1.39 eth. Thus, BTC stands strong, and if we want to convert eth into BTC, we are absolutely going to get less amount compared to eth. For example, if the price of a physical asset in Britain demands 10,000 eths within a tenure of 28 days, then the strengthening or weakening of BTC as opposed to eth determines the ultimate earning by the Britain people trading the physical asset. If the BTC weakens, they receive more BTC from that amount of eth, and if the BTC strengthens, they actually receive less BTC from that same amount of eth. The valuation keeps on varying every second, so you have to be wise to choose the perfect time to trade the options of eth.
In the case of Crypto futures, we determine the expiry date at some time in the future where the exchange will take place. They form certain standard contracts that drive the entire scenario, and there is no flexibility as such as the Crypto Options. If there is any rate fixed, then irrespective of the fluctuations, the Crypto future traders receive the exact amount they have fixed during the contract. Crypto futures may be troublesome in some cases and are bound to multiple obligations with a lack of flexibility.
The Crypto future and options are great for trading. They are quite similar for any currency pair except the fact that the valuation of different pairs is different, and we need to be clear about that before any investment. All the best!