Trading on the spot market is the most popular type of cryptocurrency trading. However, the derivatives market is also in demand — these are contracts for buying or selling crypto coins at a fixed price. An option is a type of derivative that allows you to buy cryptocurrency at an agreed price, but does not obligate you to do so. There are two types of options in total, let's look at one of them.

Call Option for Cryptocurrency

The trader knows in advance the amount they can lose. The sum of purchased contracts will be their risk. In simple terms, an option is a contract between a buyer and a seller. The essential conditions of the contract are the price and the term after which the option will take effect.

Parties to the Options Deal

The buyer of a derivative in the form of an option takes the following actions:

• pays the seller a fixed cost in stablecoins;
• receives the right to make a transaction with the desired asset after a certain time and at a set price.

The right to transact means that the buyer can refuse the deal when the term arrives. This is the main difference from a futures contract — where the purchase is already considered an obligation.

The option seller receives a set amount of funds. They are also obligated to complete the transaction with the buyer if the buyer exercises their right.

Advantages of Call Options

Such options have a number of positive features:

• risk is limited to the amount paid, while there is no ceiling on profit;
• options are resistant to volatility;
• possibility of trading with leverage;
• "stop-loss hunting" and liquidations do not affect the deal — sharp price jumps will not devalue the option.