What Are Options?
An option is a derivative contract. A call option gives the right to buy the underlying. A put option gives the right to sell it. The buyer pays a premium. The seller (writer) collects that premium and takes on the obligation if the buyer exercises.
How Options Work
Each contract has a strike price, an expiration, and a style (American, which can be exercised early, or European, which can be exercised only at expiration). The premium moves with the underlying price, time left to expiration, and implied volatility. Crypto options are commonly quoted on Bitcoin and ether, with expiries from daily to quarterly.
If you buy a call and the market never reaches a profitable exercise, the most you lose is the premium. If you sell a call or put, losses can be much larger than the premium received, so margin and assignment risk matter.
Why It Matters for Traders
Options let you express a view on direction, volatility, or both, with a defined debit for long options or a defined credit for many spreads. Perps traders also watch options positioning, because large expiries and dealer hedging can affect spot and perpetual price action around strikes.
How Perps Traders Use This
You do not need to trade options to use them as context. Track implied volatility, put/call skew, and large expiries next to funding and open interest so a move into a heavy strike is not a surprise.
Common Mistakes
- Treating a long option like a perp: it decays, and a move in the right direction can still lose money if it arrives too slowly.
- Selling naked options without a margin plan or a defined-risk spread.
- Ignoring early exercise, settlement style, and the difference between coin-margined and stablecoin-margined venues.
