Cryptocurrency is making headlines across various social media platforms as its popularity amongst both younger and older generations continue to surge. The global cryptocurrency market cap currently sits at an impressive $880 million, providing opportunities for investors of all backgrounds.
New crypto options provide the perfect opportunity to explore how blockchain technology works without having significant amounts of capital on hand. These derivatives and futures can be used in hedging strategies or by speculators who are trying to make a profit based on movements within the crypto markets.
When you buy a crypto option, this provides the purchaser with the authority (yet no requirement) to purchase or sell the underlying cryptocurrency at an agreed-upon rate by (or earlier than) a predetermined expiration date. As far as rights go, buying permission is called “call” while selling authorization is called “put.”
Brief History of Ethereum (ETH) Options
Ethereum Options have been around since 2018 when the Chicago Mercantile Exchange (CME) began offering Ethereum Futures to its clients. Since then, several exchanges such as Deribit and OKEx have opened their doors to crypto options trading.
What are Ethereum (ETH) Options?
Ethereum options are derivatives contracts where traders pay a premium for an option to buy or sell Ethereum cryptocurrency at a predetermined price, known as the strike price. This means that when selecting where to buy Ethereum options you can select from various legitimate providers with different offerings.
Options give traders a chance to participate in ETH option trading without having to put their full investment amount or margin requirements at risk. By taking either call or puts positions based on expectations for how the exchange rate of ETH may move over a specific period, they can start executing trades with relative ease.
Types of ETH Options
There are two types of ETH options: American-style and European-style. Both styles have different characteristics, but the main distinction between them is that American-style options can be exercised at any time on or before the expiration date while European-style options can only be exercised at expiration.
The most popular type of Ethereum option is the call option.
Let’s say the price of ETH is currently trading at $200 and you believe it will increase to $250 by expiration. You would then buy a $200 call option with a strike price of $250, which would give you the right to purchase ETH at $250 even if the market price is above that amount. If the market price of ETH does not reach your strike price by expiration, you will lose your premium (the amount you paid for the option) and any potential gains.
Where to Buy Ethereum Options?
There are a variety of legitimate exchanges where traders can buy Ethereum options, such as Deribit, OKEx, BitMEX, and many others. Before using any of these exchanges, make sure to do your research into their security measures and customer service ratings in order to ensure you are dealing with a reputable provider.
It is also important to consider the different types of options available on each exchange as well as the trading fees associated with buying or selling options. Additionally, some of these exchanges offer leverage trading where you can enter into a position with a lower upfront cost.
When making your decision on where to buy Ethereum options, always remember that the most important factor is safety and security so make sure to research each potential exchange thoroughly before investing any funds.
Finally, do not forget to use a cold storage wallet to store your Ethereum tokens once purchased. This means that they will be kept offline where they can’t be hacked or stolen, allowing you to keep them safe and secure.
Sum it up
Whether you are looking to hedge against crypto market volatility or make a profit from speculation, buying Ethereum options is an excellent way to get involved in the cryptocurrency markets. Customers can reap immense benefits from making educated investment choices as they are not obligated to do anything with their contracts unless desired. When buying Crypto options, buyers understand that the worst-case scenario is only limited to losing what was initially invested; in case of an unfavorable stock market climate, a purchaser’s losses won’t surpass their original capital outlay.
Ernest Miller is a research analyst for Investment Talk. He has built his career as a banking officer and later on a financial advisor. Now, he is focusing primarily on blockchain and cryptocurrency, but here you will also find his texts on the traditional economy, as well as analyses of stocks and investments.