Crypto futures, as well as options, allow
traders numerous advantages that can drive their growth in the crypto market.
Options are low-risk while futures are typically more economical. When you
decide which one suits you the best, the decision would be based on how much
risk you can take and what your liquidity consideration stands at.
Both futures and options are interesting
options for crypto investors as they give the choice of taking calculated risks
by speculating on prices with a lot of deliberation. This also leads to an
increase in the rate at which digital assets trading.
Gone are the days when trading was carried out only by financial gurus, with
futures and options, anyone can arm themselves with the right knowledge and
Let’s talk about crypto futures and how
You wish to make the most of changing
prices and at the same time, you want to bring down volatility. That’s when you
pick crypto futures as an investment since they’re derivatives where an asset
is traded at a predetermined price on a pre-set date. It is something that both
buyers, as well as sellers, mutually agree on.
Note that the futures contracts are not a
reflection of the overall value of your crypto asset. Essentially, you do not
even have ownership of a cryptocurrency like Bitcoin that you may have invested
in. Since you’re carrying out a trade on predetermined conditions, the economic
perks that come with buying an actual cryptocurrency do not apply here.
What basically happens in trading crypto
futures is that you’re rewarded on the basis of speculations. Thus, you can
keep your funds and trades safe from market movements that may not always be in
your favour. In simple terms, it wouldn’t be wrong to equate trading futures
contracts with betting since the ultimate result comes to the forefront as per
your expectations. Depending upon what the trading signals indicate and how
much your appetite for risk is, you could choose to open long or short
positions. If you expect a price rise, you could go long while if the pricesseem to be going down, you could choose to have a short position.
Irrespective of what the outcome is, your
contract will end at the pre-decided date and both the buyers as well as the
sellers must settle accounts.
In general, the futures market allows
traders to use leverage. If you opt for leveraged trading you could use
borrowed funds to open a position without having to put all of your actual
funds at stake. You only have to pay an initial margin to open a
Types of futures contracts:
It is helpful to learn about the different
features and offerings of various futures contracts to make it easier to choose
the right option:
USD-Marginated Futures Contracts
USD-pegged coins are used to settle these
contracts that support both deliveries as well as futures. Users could even
stick to a position without worrying about an expiry date by investing in a
Coin-Margined Futures Contracts
Coin-Margined Futures Contracts allow users
to choose between a perpetual and a deliverable contract. In this type of
future, investors may quote as well as settle in many different
cryptocurrencies. They also quickly respond to market bull runs and ensure maximum profit.
Futures benefits and differences
Crypto futures and options come with
advantages and disadvantages. Thus, being informed will help you make better
You must know that crypto futures are very
economical. They do not require you to pay a sum as a premium immediately
before the contract has been issued. It implies that the cost of your contract
will be lowered without cutting into your rewards when the market moves in your
Futures contracts mature at a certain point
for which the price and the date are already set. This suggests that time does
not play a negative role when it comes to contract valuation as you’re saved
from the risk of executing at the wrong time. A trade is completed only on the
expiry date of the contract.
The futures market is an old one and has
thus many investors who have been a part of it for several years. This in turn
makes the market size much larger as a result of which, large volumes of
cryptocurrencies are traded here.
As the futures market has a bigger space as
compared to the options market, there is more liquidity and accessibility.
Liquidity could be rather low in the options market which could be a problem,
particularly when there are big trades that must be executed.
Crypto options and how they work
Participants trade cryptocurrencies as
options because they represent a low-risk, low-cost alternative. This is
especially true when it comes to options trading, such as standing swaps and
Crypto options trading is yet another form
of derivatives through which buyers and sellers can determine the price and
time of the trade-in advance. The right to buy is known as a ‘call’ while the
selling right is termed as ‘put’. Options function in a similar way to
derivatives. They let traders speculate and earn from the changing prices. Like
the futures market, traders can also settle their trades here.
Options benefits and differences
Reduced Loss and Low Risk
Bear in mind that futures contracts are
weighed much earlier and are already prepared for execution at the
predetermined date. They could be risky since you cannot precisely find out
whether you will make a profit or a loss. Thus, it can be tricky to curb your
losses through hedging.
But with options, you can take stock of the
situation and see your loss potential too. With long options, you already know
the premium before you enter a trade. They are generally less risky than
An options contract may give the buyer a
right but by no means are they under an obligation to carry out the trade. This
implies that a buyer can actually take possession of the underlying asset in
profitable situations unlike in futures.
You are not obliged to execute a trade even
after taking on a long position as is the case with futures that have to be
settled after maturity.