A public market for options, giving the buyer an option to buy or sell a cryptocurrency at a specific strike price, on or before a specific date.
What Is an Options Market?
The options market is a public place to trade options. It provides cryptocurrency traders with a place to buy or sell digital currencies at a set price and time. Basic terms used in the market include call/put options and strike price. Call and put options are opposites. To elaborate, we can equate call options to buy orders and have a predetermined price and date.
Options market participants buy calls when the price of a tracked asset is projected to increase in value. In contrast, investors place sell calls when the market has a bearish outlook.
Put options, on the other hand, are sell orders. As such, they indicate a willingness by an option holder to liquidate their position. The predetermined price is called a strike price. Note that either American or European option rules govern the options market.
Apart from the above terms, an options trader needs to understand other words such as Greeks. Greeks are symbols that outline the risks during options trading. For instance, the delta symbol shows a change in the price of a tracked asset against a single dollar.
Theta, on the other hand, is used in the market to indicate a shift between the price of an option and time. It is sometimes called the time decay of an option. Gamma is another prominent symbol in the options market. It shows the change between an option’s delta and the price of a tracked asset. Other Greeks used in the market include vega and rho.