Understanding Options Contracts
An Options contract is a financial derivative granting the buyer the right—but not the obligation—to buy (Call) or sell (Put) an underlying asset at a predetermined strike price on or before a specified expiration date. The buyer pays a premium to acquire this right.
Key Features:
- Flexibility: Buyers can exercise the option if profitable or let it expire.
- Seller Obligation: Sellers must fulfill the contract if exercised.
- Limited Risk for Buyers: Losses are capped at the premium paid.
Essential Elements of Options Trading
Core Components:
- Underlying Asset: The asset tied to the contract (e.g., BTC/USD or ETH/USD).
- Expiration Date: The deadline to exercise the option.
- Strike Price: The fixed price for buying/selling the asset.
Contract Types:
- Call Option: Right to buy.
- Put Option: Right to sell.
Exercise Styles:
- European: Exercisable only at expiration (e.g., OKX Options).
- American: Exercisable anytime before expiration.
- Premium: The cost to purchase the option.
Moneyness Classification:
| Contract Type | Condition (S vs. K) | Status |
|---|---|---|
| Call | S > K | In-the-Money (ITM) |
| Call | S < K | Out-of-the-Money (OTM) |
| Call | S = K | At-the-Money (ATM) |
OKX Options Trading Specifications
Contract Details:
| Parameter | BTC Options | ETH Options |
|---|---|---|
| Underlying Index | BTC-USD | ETH-USD |
| Contract Size | 0.01 BTC | 0.1 ETH |
| Settlement Coin | BTC | ETH |
| Expiration Types | Daily, Weekly, Monthly, Quarterly | |
| Settlement Price | 1-hour TWAP before expiration |
Options vs. Futures: Key Differences
| Aspect | Options Trading | Futures Trading |
|---|---|---|
| Rights/Obligations | Buyer has rights; seller has obligations | Both parties are obligated |
| Margin | Seller posts margin; buyer pays premium | Both post margin |
| Risk/Reward | Buyer: Limited loss; Seller: Unlimited risk | Unlimited risk/reward |
Minimum Capital Requirements
| Account Type | Minimum Requirement |
|---|---|
| Multi-Currency Account | $10,000 USD |
| Portfolio Margin Account | $10,000 USD |
| Simple Options Trading | None |
Fees and Account Setup
Trading Fees:
- Refer to OKX’s Fee Schedule.
Account Modes:
- Isolated Margin: For long options (no liquidation risk).
- Cross Margin: For margin offsetting (e.g., using stablecoins as collateral).
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FAQ Section
1. What currencies are used for OKX Options settlement?
- BTC or ETH; stablecoins can be used as margin in cross-mode.
2. How is the settlement price determined?
- Time-weighted average price (TWAP) of the index 1 hour before expiration.
3. Can I trade Options 24/7 on OKX?
- Yes, Options trading is available round-the-clock.
4. What’s the contract multiplier for BTC Options?
- 0.01 BTC per contract (0.1 ETH for ETH Options).
5. How does Portfolio Margin benefit Options traders?
- Enables risk-based margin offsets and delta hedging.
6. What happens to ITM options at expiration?
- Automatically exercised and cash-settled.
For further details, visit OKX Options Trading.
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