HomeOPINIONCrypto Options and its increasing adoption in a volatile market

Crypto Options and its increasing adoption in a volatile market

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The massive embracement of crypto options by individual traders and institutions speaks a huge volume of the prospects associated with the trend. The trend and other related crypto innovations have continued to transform the global financial landscape and outlook. For the purpose of emphasis, these innovations overtly placed cryptocurrencies at the vanguard of global economic transformation, relegating traditional financial mechanisms. With the expansion of cryptocurrencies and theirs trends, subscribers become open to uncountable explorations. Crypto options, as programmed remain one of such innovations.

Crypto options as a trend


As programmed, crypto options emerged as a derivative contract, which allows a buyer to grossly purchase or sell a particular virtual asset at a given amount and future time. This contract does not in any way mandate the crypto trader to indulge in the aforementioned processes. As a trader in the industry, the term “put” means the right to sell while “call” relates to buying such an asset. With this in place, traders successfully make better staking decisions as regards price tendencies of assets. For instance, if a trader feels an asset possesses the tendency to decline in value, such trader then secures the “put” feature option. When the trader activates this, the gains attached to that particular asset become obtained when it declines in value and vice versa. In common parlance crypto options run to allow traders predict the possible future prices of a particular asset.


Furthermore, crypto options tend to become resolved via fiat or virtual tokens. Deribit, for instance, engages in the settlement of the crypto option contracts in fiats. Okex, on the other hand usually relays crypto option contracts in cryptocurrencies, particularly bitcoin. Without equivocation, this trend opens the eye of investors to the instability of the crypto market. It offers enablement for them to release their startup assets without worries. With this, they take advantage of the volatility to harness the prospects obtainable in the market.

If Lewis for instance decided to buy 80 shares of an asset for $70 each. By simple mathematics, Lewis needs $5,600 to fully obtain such an asset. However, if Lewis decides to use crypto options, the total cost of obtaining such assets becomes drastically reduced. How right? Such exposure to the asset by Lewis can also be secured just by purchasing an option for about $200.

Styles & Protocols involved in the options mechanism


Also, the styles associated with crypto options usually emanate in two ways, namely, American and European styles. In the American style, traders possess the capacity to activate the contract at any given period before its expiration. It works with the strike price attached to the particular asset. For the purpose of clarity, a strike value means the right of the trader to buy or sell the asset at an exact amount. The European style on the other hand allows traders to engage the contract at the period of its expiration.

The protocols or processes obtainable in crypto options is not rocket science. As designed, it usually manifests after a trader, for instance, initiates a call and puts options contracts. Afterward, such traders must highlight the underlying contracts on the crypto options exchange. As earlier noted, the option possesses a cost, identified as premium. In addition, the value of option premiums remains close to the remaining time on the contract. Similarly, an option buyer possesses the right to order in the exchange for an option seller to consequently sell.

The rising adoption of the trend in the volatile market

As earlier hinted, the level of patronage and adoption of crypto options in recent times has been remarkable. Both institutions and individual investors now heavily rely on the trend to secure monumental gains in the volatile market. With crypto options, users critically assess the unstable market and invest logically in a bid to avert risky investments.

In an analysis by Trade Alert, the crypto option market recorded a massive turn up in 2021, amounting to about 8 billion traded contracts. This, however, beat down the 2020 records which secured about 7.47 billion traded contracts. In the analysis, it manifested that most of the contracts traded in the crypto options exchange manifested from individual/retail traders. Owing to the persistent instability of the market, the adoption of crypto options tends to even rise beyond expectations soon. With DeFi, many more crypto assets look set to become incorporated into the new system.

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