What Are Ethereum Options: Complete Guide on ETH Options

Mihai-Alexandru Cristea 20/09/2022 | 21:42

Ethereum options contracts allow investors to place a bet on the future price of Ethereum with the option to cash out at any time. Read on to know more.


Ethereum has been one of the hottest topics in the world of cryptocurrencies over the past few years, and the conversation isn’t slowing down anytime soon.

Cryptocurrency enthusiasts are interested in Ethereum because it’s more than just a digital asset that can be traded.

It’s more like an operating system that allows developers to build their applications, similar to how apps are built on top of Apple’s iOS or Google’s Android operating systems.


What are Ethereum (ETH) Options?

ETH option trading is the process where one party takes advantage of fluctuations in the price of underlying security like ether to generate profits in a way that’s similar to what traders do with stocks and commodities.

Options also allow traders who don’t want to risk their full investment amount or margin requirements to participate in eth option trading. ETH option trades are executed by taking positions using either call or puts based on expectations for the direction of movement in ETH exchange rates over a specific period.


Brief History of Ethereum

As part of the Ethereum project’s white paper, Vitalik Buterin, the co-founder, explained the blockchain’s mechanics, applications, and potential concerns. Then, two years later, Buterin and ConsenSys co-founder Joe Lubin launched Ethereum.

A team of Ethereum’s founders created an electronic, programmable network that could do things like safe virtual currency trading. Forwarding to 2016, network participants took control of its blockchain.

One year later, The DAO was hacked for $50 million in ether. That same year, there was a split in the chain with the two groups operating as Ethereum (ETH) and Ethereum Classic (ETC).


Basics of Option Trading

In options trading, you speculate on the future direction of the stock market as well as individual bonds and stocks. Options contracts allow the buyer or seller to buy or sell an underlying asset at a stipulated price by a specified date, but they do not bind them to do so.


Ethereum Staking

Ethereum Staking is a process that enables eth tokens (representing one’s share in the network) to be used to secure Ethereum networks against spamming attacks and generate new blocks for the Ethereum blockchain.


Ethereum Options

Ethereum’s smart contract capabilities offer many opportunities for risk management, such as leveraged positions, hedging, and automated trades. In addition, the ability to trade derivatives makes ETH-based derivatives some of the most sophisticated financial instruments.


Are There Options on Ethereum?

Yes, there are! To trade options, you need to open a brokerage account and be ready to buy/sell the underlying asset (e.g., ether). There are two types of options – Ethereum call options and Ethereum put options.

Eth call options give you the right, not the obligation, to buy ETH at a fixed price. Put options give owners the right, but not the obligation, to sell ether at a set price within a given time frame or by expiration date.


Types of ETH Options

There are two main categories of ETH options.


Call Option (Bullish)

With a call option, you have the right to buy an asset at a fixed price. If the price of that asset rises to or above the set price before the expiration date, you can use your call option to buy it at that lower price.


Put Option (Bearish)

With a put option, you have the right to sell an asset at a fixed price. If the price of that asset falls below the set price before the expiration date, then you can use your put option to sell it at that higher price.



ETH Options vs. Ethereum

ETH Options

These are derivative contracts traded through the CME Group or Chicago Board Options Exchange (CBOE). The options give investors more leverage than regular exchange-traded funds (ETFs) since they can be bought anytime during a set period.



ETH is designed to use a blockchain network – a decentralized, distributed public ledger that records all transactions. In blockchain transactions, cryptography is used to secure and validate the network.


Buying Ethereum Options

Etherum options trading is not the easiest thing to wrap your head around. When you trade an option, you are purchasing the right to purchase or sell a certain cryptocurrency in the future at a specific price.


Expiration Date

The expiration date is when you have to choose whether or not to keep the option contract or collect the profit by closing it. The money options allow the owner to exercise or close the position to collect the profit.

An option out of the money on the day it expires loses all value. So, for example, if you do not plan to exercise your option, you can exit your contract before it expires and either profit or lose money.


Strike Price

A call option’s strike price is the price at that an option holder can purchase the assets from the broker, while a put option’s strike price is the price the asset can be sold to the broker. These prices are set, which means they are determined in predetermined monetary amounts.


In the Money (ATM)

If the cost of the option exceeds the market price of the underlying asset, the option is overbought. An in-the-money (ITM) call option is when the owner of the option has the opportunity to buy an asset at a lower cost than the market rate.


Out of the Money (OTM)

An out-of-the-money (OTM) call option has a strike price higher than the underlying asset’s market value, while an OTM put option has a strike price lower than the asset’s market value.


At the Money (ATM)

If the strike price equals the asset’s market value, this option would have no potential gain or loss. There are more types of eth options trading beyond these basic terms, but those should give you a good idea about how these types of contracts work.


Are ETH Options a Good Investment?

Yes, they are! Options contracts can trade several different stocks, currencies, commodities, and more.

Concerning the Ethereum markets, these contracts can be used for speculation or hedging. It is an interesting alternative for those interested in getting exposure without the risk of buying the underlying asset.


Wrapping Up

For customers, the best advantage of making informed investment decisions is that they don’t have to do anything with their contract unless they want to. Buying Crypto options carries the risk of only losing the initial investment. If the stock market goes against the buyer of an option, their total loss won’t exceed their initial investment.

If you want to invest your asset, try something new, or you’re considering where to buy Ethereum options, you can start trading with Redot.

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Mihai-Alexandru Cristea | 12/04/2024 | 17:28
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