Put Options: Effectively Manage Price Risk With This Tool

Financial markets have been abuzz with activity since the 17th century. While they’re a great place to make profit, the risk of losing money is also very real. Multiple asset classes are available for trading: Among them, options are considered a relatively low-risk investment. Traditionally, stock options are traded, but it’s hard to ignore crypto options, given the boom of cryptocurrency in the past few years.

While options can be tied to any asset (e.g., stocks or bonds), crypto options are specifically tied to the performance of crypto assets. As a result, a trader doesn't need to own an asset before buying or selling the option for it. With crypto options, investors of any portfolio size can participate in the crypto market and reap its benefits.

What Are Crypto Options?

Crypto options are financial derivative products that confer upon the trader the right (not the obligation) to buy or sell an underlying asset at a specified price or strike price after the premium is paid. An options contract usually lasts for a specific time period, within which the option must be exercised. This contract lapses on a particular date, known as the expiration date.

Crypto options trading is a way for options holders to be part of the crypto market without necessarily owning the crypto itself. Not only are crypto options cheaper than their underlying assets, they’re also perceived to be less risky. The low level of risk involved and high leverage potential are arguably the biggest draws for retail traders.