Well, in 2023, the global cryptocurrency market was valued at over $2 trillion,
This showed increased interest in crypto trading. If you are a newcomer, then terms like “crypto futures” and “options” may seem a bit confusing. This post will help to clear all such terms so that you understand them and decide upon the best trading strategies with crypto options and futures.
What Are Crypto Futures?
Crypto futures are derivative contracts where you agree to buy or sell a specific amount of cryptocurrency at an already fixed price on a future date. It simply means that you make a promise to trade Bitcoin, Ethereum, or any other crypto at a certain price in the future.
For example, one can feel that a Bitcoin would appreciate three months down the line. One can then go ahead and sign a futures contract to buy a Bitcoin at the existing price with the expectation to sell it at a better price when the value of it appreciates. Take this same example—suppose you agree to buy 1 Bitcoin at ₹30,000 three months from now. When the price of the Bitcoin turns out to be ₹35,000, you will sell it out at a profit of ₹5,000.
Futures have also been used where someone wishes to freeze a given price for the purchase or sale of a cryptocurrency at a future date when the markets vary widely in value.
What are Cryptocurrency Options?
Crypto options implies the right but not necessarily the obligation to buy or sell a cryptocurrency presently at a fixed price. There are two categories of options; the first one is when a buyer can make a “call,” and a “put” can provide liberty to sell by a seller.
Assume, you have just bought a call option expiring in the next month at ₹30,000 for the opportunity to buy 1 Bitcoin. If the price went up to ₹35,000, you exercise your option and buy at the lower price, thereby making a ₹5,000 profit.
You can use crypto options for hedging market volatility, price speculation, and to gain extra income from received option premiums.
Futures vs Options: How are these two Different?
What is crypto futures vs options all about? The obvious difference lies within obligations and flexibility. In the case of a future, you are undoubtedly obliged to sell or buy at a decided-upon price at the time of the contract’s expiration. Nonetheless, with an option, you are granted the freedom to exercise it or abandon it, depending upon the market situation.
The Advantages of Futures Contracts
- Simplicity: There is no complexity in regard to futures; it is nothing but an agreement to exchange an asset at a fixed price in the future.
- Liquidity: Crypto futures markets tend to be more liquid and thus allow easy entry or exit from positions.
- Hedging: Very good hedging instruments against price swings for miners and traders.
Benefits of Options Contract
The Advantages of Futures Options
- Flexibility: Options provide the right, but not the obligation, to trade. This allows for more control.
- Risk Management: The maximum loss is restricted to the premium that is paid to carry the option.
- Strategic Uses: Allows different strategies like that of hedging, speculation, and income earning because of premiums.
Here is the summarized table stating crypto futures vs options:
| Feature | Futures | Options |
| Obligation | Obligated to buy/sell at the agreed price on the expiration date | Right, but no obligation to buy/sell at a specific price before the expiration date |
| Flexibility | Less flexible due to the obligation | More flexible as it provides the choice to trade |
| Simplicity | Straightforward; trade at a fixed price in the future | More complex; involves deciding whether to exercise the right |
| Liquidity | Often more liquid; easy to enter and exit positions | Can vary, but generally less liquid compared to futures |
| Hedging | Excellent for hedging against price fluctuations | Useful for hedging, speculation, and income generation |
| Risk Management | Potential for significant losses if the market moves against the position | Maximum loss is limited to the premium paid for the option |
| Strategic Uses | Mainly used for speculation and hedging | Allows for various strategies like hedging, speculation, and income generation through premiums |
Crypto Futures vs Options Trading: Which is Better for You?
The decision of crypto futures vs options trading everyone takes is based on the goal and risk tolerance.
- For Guessing: If you believe in the price direction upfront, futures could be right for you as they are simpler and potentially more profitable.
- Risk Management: Options are great if you’d like to manage risks well. Limited downside suits well for careful traders.
- Flexibility: If you like to have an option to act upon the situation, seeing the market conditions, options provide that.
Delta Exchange: Your Go-To Platform for Crypto Futures and Options
Delta Exchange No. 1 cryptocurrency options and futures trading platform. If you’re a professional or novice trader, the Delta Exchange interface is friendly, its commissions are low, and its security is the best in class. Here is why Delta Exchange is severally better than other options:
- Variety of Products: Trade a gamut of crypto futures and options—anything from Bitcoin and Ethereum to lesser-known altcoins.
- Advanced Trading Tools: Delta Exchange avails you of the advanced trading tools, and many features integrated, to enrich the experience of your trading.
- Educational Resources: First time in cryptos trade? Delta Exchange is there with the help of its educational resources to enable you to get a hold of the know-how of cryptos’ futures and options.
The Bottom Line
Understand the differences and benefits of crypto futures and options. This understanding can greatly enhance one’s trading strategy, be it for the simplicity of futures or the options that provide flexibility. With that comes a great set of platforms, like Delta Exchange, enabling users to take part in their first steps regarding crypto options and futures trading with confidence.
Ready to test your trading prowess? Check out the exhilarating scope of crypto futures vs options!
