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EducationalMarch 19, 2021

A Beginner's Guide To Ethereum Options: The What, The Why, The How

Shubham Goyal
Product Specialist
March 19, 2021

With the massive surge and coverage of Ethereum and other cryptos in recent days, many are certainly interested in trading and entering these markets. Understandably, there’s the fear of losing all your money in case things go south. Lucky for you all, there is a solution, options!

What are Options – Ethereum and Crypto Trading

Options are a form of financial derivative that gives you the “option”, but not the compulsion, to buy or sell a cryptocurrency (or stock, share, etc.) at a specific price which is known as the strike price at a certain expiry date. To attain an option, the buyer has to pay a premium amount which is, in most cases, cheaper than buying the cryptocurrency directly from the market.

One of the most lucrative things about options trading, especially in the volatile world of cryptocurrencies is the minimization of risk. This is because options allow trading without having to take ownership of the underlying asset at any point. Unlike directly buying crypto from the market, options allow you to take a speculative position on the future course of a market price – be it bearish or bullish.

Ethereum Options: The Why

With the new possibility of Ethereum options, you can trade with a much more conservative approach if needed. This is because a trader who chooses to buy options can never lose more than their initial premium value. While this value may vary, it is usually always less than the market value of the asset hence reducing overall loss possibility as stated above.

However, it’s still true that the option seller faces comparatively more risk, as selling options might result in high losses in volatile markets.

Another positive is that you can benefit in both bullish and bearish markets with crypto options: If you are bullish on a cryptocurrency and expect its price to rise, you can go for a call option. Otherwise, you can opt for a put option if you are bearish.

Now, while Options may sound like a perfect way to lower risks and increase profit, there are always some things that you need to learn and keep in mind. This is because options are one of the most complex financial tools that common retail traders are able to utilise. Some basic terms one should be well versed with are –

The right to buy is the Call option, while the right to sell is the Put option. Delta Exchange also allows you to trade in Move options. A Move contract is essentially an Option Straddle, or a direction-neutral option tactic that combines a put option and a call option with the same strike price (the price at which the holder of an option can buy or sell the underlying asset).

Once grasped, however, the following concepts will enable traders to use the most popular derivative in the world to enhance profits and reinforce risk management.

Ethereum & Ethereum Options

Ethereum is a decentralized, open-source blockchain featuring smart contract functionality. It is the second-largest cryptocurrency by market capitalization, after Bitcoin, and is also the most actively used blockchain.

Ethereum options have been present on cryptocurrency exchanges for some time in the recent past, but haven’t been regulated. Now, ETH options are being slowly introduced by some regulated institutions, Delta Exchange being one of the few heading this change in the way we trade Cryptocurrencies.

Over the past few years, Ethereum has become one of the most well-known as well as one of the most trustworthy and supported Cryptocurrencies to exist. Just 10 days ago Ethereum reached an All Time High of 1,50,000 shattering many previous predictions and bringing in many new investors into the Crypto which is the second most valuable just after Bitcoin.

This is amazing because just a few months ago, near the end of 2020 Ethereum was trading at 50,000 which means that there has been a massive tripling of the price within the short span of two months. While the price has come down again by about 20% in the past 1-2 weeks, ETH is expected to keep growing and rise massively within the next few years making it the perfect growing Crypto for options trading.

Looking at this, this could very well be the perfect time to invest and trade in Ethereum options, and that too with the new possibility of trading Ethereum options through Delta Exchange making it something much easier to do while holding along a lower level of risk.

To start trading crypto options on Delta, here are the steps you have to follow:

  1. Register:This takes less than 1 minute and requires only a verified email address. No other KYC is needed.
  2. Fund Your Delta Exchange Wallet:Bitcoins, Ethereum, and more cryptos can be used to fund your wallet with more being added regularly!
  3. Convert BTC to USDC:All futures and perpetual contracts on Delta Exchange are margined and settled either in Crypto or USDC.
  4. Make Your First Trade:Now you are all set to trade on Delta Exchange!

Happy crypto options trading!

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