Exchange trading takes place not only on spot platforms. Derivatives are also very popular — options are one type of derivatives. Let's examine the meaning of the concept of put option in cryptocurrency trading.

What does a put option mean

Technical analysis allows a trader to earn substantial income. Fairly accurate prediction of future price is the key to a successful options trade.

The option holder gets the opportunity to transfer coins to another party who will provide fiat money. Playing in a bear market allows you to get more fiat money than under similar conditions in the spot market.

Advantages of put options

Options are useful for traders for the following reasons:

• ability to trade in bear markets;
• only options allow you to profit during sideways movement of an asset;
• cryptocurrency trader receives accurate information about possible risks;
• options provide protection against "stop hunting" and liquidations;

Such derivatives allow experienced traders to successfully conduct trades in almost any market.

Profit calculation and strike

Is it necessary to hold an option until the expiration date

This is not necessary. A purchased option can be sold at any time, and a sold option can be bought back. The difference in the transaction price will be the trader's profit or loss.

How the option price is calculated

It's important for a trader to understand the structure of an option's price. Its main elements are:

• option type — put or call;
• expiration date;
• strike;
• price of the underlying cryptocurrency;
• volatility — the higher it is, the more expensive the option.

Beginners should be cautioned against buying options with all their money. Trades should also be avoided during times of high asset volatility.