Options trading is a powerful financial instrument that allows traders to manage risk, hedge positions, and potentially generate returns in various market conditions. At its core, an options contract is a derivative that grants the buyer the right—but not the obligation—to buy or sell a specified amount of an underlying asset at a predetermined price (the strike price) on or before a specific future date. In exchange for this right, the buyer pays a fee known as the premium.
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The seller (or "writer") of the option collects this premium but assumes the obligation to fulfill the contract if the buyer chooses to exercise it. If exercising the option isn’t profitable, the buyer can simply let it expire, losing only the premium paid.
This flexibility makes options appealing for both conservative and advanced traders. Whether you're looking to speculate on price movements, protect existing holdings, or earn income through premium collection, understanding options is essential in modern digital asset markets.
Key Components of Options Trading
To trade options effectively, it's crucial to understand their fundamental elements:
Underlying Asset
This is the financial instrument on which the option’s value is based. For example, Bitcoin (BTC) and Ethereum (ETH) are common underlying assets in crypto options. The price movement of these assets directly impacts the value of the corresponding options contracts.
Expiration Date
Every option has a set expiration date—the point at which the contract becomes void. After this date, the right to exercise expires.
Strike Price
Also called the exercise price, this is the predetermined price at which the underlying asset can be bought (call option) or sold (put option).
Option Type
- Call Options: Give the holder the right to buy the underlying asset at the strike price.
- Put Options: Grant the right to sell the underlying asset at the strike price.
Exercise Style
- American-style options can be exercised anytime before expiration.
- European-style options, like those offered by OKX, can only be exercised on the expiration date.
Option Premium
This is the market price of the option itself—the cost paid by the buyer to acquire the rights conferred by the contract.
Options are also categorized based on their moneyness:
- In-the-Money (ITM): Exercising would result in immediate profit.
- At-the-Money (ATM): The strike price equals the current market price.
- Out-of-the-Money (OTM): Exercising would yield no profit.
For example:
- A BTC call option with a strike price below the current BTC/USD index is ITM.
- One with a higher strike is OTM.
How Are Options Settled?
OKX options are cash-settled in BTC or ETH, not stablecoins. This means profits or losses are paid out directly in cryptocurrency based on the difference between the strike price and settlement value.
However, traders can use stablecoins like USDT or USDC as collateral when trading under Portfolio Margin or Multi-Currency Mode.
The underlying index for these contracts is either BTC/USD or ETH/USD, tracked in real time. Settlement occurs automatically for in-the-money options at expiry.
👉 Learn how cash settlement simplifies your exit strategy.
Contract Specifications
Understanding contract details ensures accurate position sizing and risk assessment.
Contract Size:
- 1 BTC option = 0.01 BTC
- 1 ETH option = 0.1 ETH
- Settlement Coin: BTC or ETH
Tick Size: Varies by premium level:
- Below 0.005 BTC/ETH → 0.0001
- Above 0.005 BTC/ETH → 0.0005
- Mark Price: Calculated using the Black model with real-time implied volatility, capped and floored for fairness.
- Expiry Time: 08:00 UTC on expiration day
- Settlement Price: Time-weighted average of the index price during the final hour before expiry (sampled every 200ms)
- Trading Hours: 24/7
- Exercise Method: Automatic cash settlement for ITM options
New contracts are listed daily at 8:30 UTC, with expiries available across:
- Daily (1–4 days out)
- Weekly (1–3 weeks)
- Monthly (1–3 months)
- Quarterly (March, June, September, December cycles)
Options vs Futures: Key Differences
| Feature | Options Trading | Futures Trading |
|---|---|---|
| Rights & Obligations | Buyer has right, not obligation; seller must fulfill if exercised | Both parties obligated to settle |
| Margin Requirements | Seller posts margin; buyer pays premium only | Both parties must post margin |
| Risk Profile | Buyer’s loss limited to premium; seller’s risk can be unlimited | Gains and losses are theoretically unlimited |
This makes options ideal for defined-risk strategies, while futures expose both sides to open-ended outcomes.
Minimum Capital Requirements
Access to options varies by account type and verification status:
- Switching to Multi-Currency or Portfolio Margin Account: $10,000 minimum
- Simple Options Trading: No minimum
- Non-simple Options (China ID verified): $10,000 required
- RFQ or Liquid Market Access: No capital requirement, but minimum RFQ size is $1,000
No upfront capital is needed for basic options trading, making it accessible to many users.
Frequently Asked Questions (FAQ)
Q: Can I trade options without holding BTC or ETH?
A: Yes. You can use stablecoins like USDT or USDC as margin under Portfolio Margin mode, even though settlement occurs in BTC or ETH.
Q: Are OKX options physically or cash-settled?
A: All OKX options are cash-settled in BTC or ETH. There's no physical delivery of assets.
Q: How is the settlement price calculated?
A: It's a time-weighted average of the BTC/USD or ETH/USD index over the last hour before expiry, sampled every 200 milliseconds.
Q: Do I need to manually exercise my option?
A: No. In-the-money options are automatically exercised and settled upon expiration.
Q: What happens if my option expires out-of-the-money?
A: The option expires worthless, and your loss is limited to the premium paid.
Q: Can I use perpetuals to hedge my options positions?
A: Yes—but note that BTC-USDT and BTC-USD are treated as separate underlyings in Portfolio Margin calculations, so cross-product hedging may not reduce margin usage.
Managing Your Account Settings
Advanced traders should consider enabling Portfolio Margin, which supports multiple currencies as collateral and offers more efficient risk management through margin netting.
If you're primarily buying options or using them for small-scale hedging within a broader portfolio, standard margin modes may suffice.
You can choose between:
- Isolated Mode: Each position has dedicated margin; ideal for long options buyers who want zero liquidation risk.
- Cross Mode: Shares margin across positions; useful for complex strategies involving shorts or stablecoin collateral.
👉 See how Portfolio Margin can optimize your capital efficiency.
Enable Auto-Borrow in trading settings if you plan to use USDT or USDC as margin for BTC/ETH options. Note:
- Only negative equity (liabilities) incurs interest.
- Potential borrowings arise when your required initial margin exceeds available balance in the relevant currency.
Interest rates are historically stable and transparently displayed on-platform.
Understanding these mechanisms helps prevent unexpected margin calls and enhances strategic flexibility in volatile markets.
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