Definition
Options are derivative contracts whose value is based on an underlying asset, such as a cryptocurrency or a crypto index. They grant the holder the right, but not the obligation, to buy or sell the underlying asset at a predetermined price, known as the strike price, on or before a specified expiration date. The buyer of an option pays a cost called a premium to the seller, who takes on the obligation to fulfill the contract if the buyer chooses to exercise that right.
In crypto markets, options are used to express views on future price movements or to manage exposure to volatility in digital assets. The two basic types are call options, which relate to buying the underlying asset, and put options, which relate to selling it. The value of an option depends on factors such as the current market price of the underlying asset, time remaining until expiration, and expected price volatility.
In Simple Terms
Options are agreements that let someone lock in the choice to buy or sell a crypto asset at a fixed price in the future, without being forced to go through with it. The person who buys the option pays a fee for this choice, while the person who sells the option agrees to honor the deal if the buyer decides to use that right. Because they are tied to another asset rather than being assets on their own, options are considered a type of derivative in trading.