Options Trading and Contracts Trading: Understand Their Differences

In the currency circle, option trading and contract trading are both popular among investors. Options trading refers to the right to buy or sell a certain number of digital assets at an agreed price on a certain trading day. The buyer pays the premium to obtain the option. The right to exercise the option or to waive the exercise, so the option is also called an option, and a contract transaction refers to an agreement between the buyer and the seller to receive a certain amount of an asset at a specified price at a certain time in the future, and the contract transaction is It is developed on the basis of spot forward contract trading, so this transaction is also a new way of standardized buying and selling. So what is the difference between currency option trading and contract trading? The editor will introduce it to you in detail below.

What is the difference between options trading and contract trading?

Options and contracts are two different forms of trading in the cryptocurrency trading market. Options and contract trading on the Binance exchange come with different trading styles, risks, and rewards. In options trading, a trader has the right, but not the obligation, to buy or sell an asset at a specific price at a certain time in the future. In contract trading, traders bear the obligation to buy or sell assets. Both forms of trading have certain risks and benefits. Traders should pay a certain amount according to their own risks

1. Different trading methods

Options are a kind of derivatives, and purchasing option contracts requires A fee that gives the holder the right to buy or sell a certain amount of cryptocurrency within a specific time. The price of an option contract is affected by factors such as market volatility, expiration date and exercise price.

A contract is a standard form of currency trading in which buyers and sellers trade a certain amount of cryptocurrency at a specific price when the contract expires. Contract prices depend on market supply and demand and have fixed expiration dates and execution prices. Compared with options, contracts have the characteristics that both parties have obligations and rights. Options have rights but not obligations, while contracts have both obligations and rights.

2. Risks and returns are different

The risk of options is relatively small. The buyer only needs to pay the option fee. Even if the market volatility decreases, there will be no risk. Buyers control losses and have the flexibility to buy or sell cryptocurrencies.

Contract trading involves higher risks because buyers and sellers must transact at a fixed contract price. If the market price fluctuates wildly, the buyer may need to pay a higher contract price, while the seller may not be able to obtain more trading profits. However, contract trading also offers higher earning potential because they have a fixed value and expiry date.

3. Different trading restrictions

The main restriction on option trading is the option fee. The buyer needs to pay a certain fee as the option contract purchase fee, as well as the option expiration date and execution price. The trading party must conduct a detailed analysis of factors such as market volatility and ensure that the actual trading price of the option meets personal expectations.

Contract trading requires buyers and sellers to reach a consensus on the amount of cryptocurrency, contract price and expiration date. The trading party must determine the appropriate contract price, appropriate contract amount and appropriate contract expiration date to ensure the reliability of the transaction.

4. Different liquidity

Options have relatively low liquidity because they have fixed expiration dates and exercise prices. If market prices fluctuate significantly, there will be a large number of unexercised options. Buyers and sellers may suffer losses as a result.

Contracts are more liquid because they have a fixed expiration date and strike price. Buyers and sellers can buy or sell a contract at the market price at any time, which makes trading relatively flexible.

Digital Currency Options Trading Tutorial

The following editor will take the Ouyi OKX exchange as an example (new users can click here to register an account) to introduce the specific operations of option trading in detail:

1) Buy and open a position

Experienced professional users can choose the T-shaped quotation mode, which provides more options contract types.

Take BTC options as an example: Click the currency pair switching button on the trading page, click BTC under the options tab on the new page, and then select all options.

Select [Call Option]—Select the exercise date—Select the option contract you want to trade among option contracts with different execution prices.

Select the full/isolated position mode, - [Limit Order] - enter [Price], [Quantity] - click [Buy].

Ordinary users can directly select options contracts with different expiration dates and types for trading in the list navigation bar, which is faster.

2. Sell to close the position

European options contracts can be closed in two places: the transaction page and the specific position page. Here we take the closing of a specific position page as an example. Click [Position]—select the specific position to be closed—enter [Price] and [Quantity]—click [Close Position].

Warm reminder:

1) European options are European options. The buyer and seller can only exercise and be exercised at 4:00 pm (HKT) on the expiration date of the contract, but after Positions can be closed in advance before expiration.

2) When the option contract expires, the profitable option contract will be automatically exercised at 16:00 (HKT) on the same day, and the losing option contract will automatically expire and will not be exercised.

3) If you need to close all positions quickly, you can select a specific position and click [Close Market Price].

3. Pending order query

At the bottom of the main page of opening a position, click [Current Order] - select the order method to view the current pending order, or click [Cancel Order] to cancel the pending order.

4. Position view

After the pending order is completed, the user can see the relevant data of his position in the [Position] list: average opening price, position volume, initial margin and rate of return, etc. .

In the digital currency market, there are many exchanges that can conduct options trading and contract trading. When making a choice, investors must consider the exchanges from many aspects and try to choose the leading mainstream transactions. Therefore, it mainly depends on whether the latest information on options or contract transactions can be viewed in the exchange, whether the official website and APP can be used normally, the assets of the exchange and how many trading pairs there are in the exchange. These aspects can be judged. Is the exchange safe and compliant?

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