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What are Call Options

What Is a Call Option?
Call options are financial contracts that give the option buyer the right, but not the obligation, to buy
a stock, bond, commodity, or other asset or instrument at a specified price within a specific time
period. The stock, bond, or commodity is called the underlying asset. A call buyer profits when the
underlying asset increases in price.
A call option may be contrasted with a put option, which gives the holder the right to sell the
underlying asset at a specified price on or before expiration.

Understanding Call Options

Let's assume the underlying asset is crypto. Call options give the holder the right to buy 100 contracts
of a crypto at a specific price, known as the strike price, up until a specified date, known as the
expiration date.
For example, a single call option contract may give a holder the right to buy 100 contracts of
Ethereum at $1000 up until the expiry date in three months. There are many expiration dates and
strike prices for traders to choose from. As the value of Ethereum goes up, the price of the
option contract goes up, and vice versa. The call option buyer may hold the contract until the
expiration date, at which point they can take delivery of the 100 contracts of ethereum or sell the
options contract at any point before the expiration date at the market price of the contract at that
time.
You pay a fee to purchase a call option, called the premium. It is the price paid for the rights that the
call option provides. If at expiry the underlying asset is below the strike price, the call buyer loses the
premium paid. This is the maximum loss.
If the underlying asset's current market price is above the strike price at expiry, the profit is the
difference in prices, minus the premium. This sum is then multiplied by how many shares the option
buyer controls.
For example, if Ethereum is trading at $12000 at expiry, the option contract strike price is $4000, and
the premium cost the buyer 500$, the profit is $12000 - ($4000 + $500) = $7500. If the buyer bought
one options contract, their profit equates to 7500$ for an initial 500$ buy.
Now, if at expiry Ethereum is trading below $4000, obviously the buyer won't exercise the option to
buy the shares and it expires worthless. The buyer loses $500 from the premium fees, but that's all.
That's the beauty of options: You're only out the premium if you decide not to play.

How Do Call Options Work?

Call options are a type of derivative contract that gives the holder the right, but not the obligation, to
purchase a specified number of shares at a predetermined price, known as the “strike price” of the
option. If the market price of the crypto rises above the option’s strike price, the option holder can
exercise their option, buying at the strike price and selling at the higher market price in order to lock
in a profit.
Options only last for a limited period of time, however. If the market price does not rise above the
strike price during that period, the options expire worthless.

Why Would You Buy a Call Option?

Investors will consider buying call options if they are optimistic—or “bullish”—about the prospects of
its underlying crypto. For these investors, call options might provide a more attractive way to
speculate on the prospects of a coin because of the leverage that they provide. After all, each options
contract provides the opportunity to buy 100 contracts of the crypto in question. For an investor who
is confident that a coin contract will rise, buying contracts indirectly through call options can be an
attractive way to increase their purchasing power.

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Reading Options Tables

More and more traders are finding option data through online sources. Though each source has its
own format for presenting the data, the key components generally include the following variables:
 Volume (VLM) simply tells you how many contracts of a particular option were traded during
the latest session.
 The "bid" price is the latest price level at which a market participant wishes to buy a
particular option.
 The "ask" price is the latest price offered by a market participant to sell a particular option.
 Implied Bid Volatility (IMPL BID VOL) can be thought of as the future uncertainty of price
direction and speed. This value is calculated by an option-pricing model such as the Black-
Scholes model and represents the level of expected future volatility based on the current
price of the option.
 An Open Interest (OPTN OP) number indicates the total number of contracts of a particular
option that have been opened. Open interest decreases as open trades are closed.
 Delta can be thought of as a probability. For instance, a 30-delta option has roughly a 30%
chance of expiring in the money. Delta also measures the option's sensitivity to immediate
price changes in the underlying. The price of a 30-delta option will change by 30 cents if the
underlying security changes its price by $1.
 Gamma is the speed of the option for moving in or out of the money. Gamma can also be
thought of as the movement of the Delta.
 Vega is a Greek value that indicates the amount by which the price of the option would be
expected to change based on a one-point change in implied volatility.
 Theta is the Greek value that indicates how much value an option will lose with the passage
of one day's time.
 The "strike price" is the price at which the buyer of the option can buy or sell the underlying
crypto if they choose to exercise the option.

Options Frequently Asked Questions

What are options?

Options are derivatives that offer their holders the right—but not the obligation—to buy or sell an
asset at a stated price within a specific time frame. Options contracts generally represent 100
contracts of an underlying crypto.

What do you mean by exercising an option?

Exercising an option means buying or selling the option at the stated price.

What are the two types of options?

The two types of options are as follows:
 Call options: These options provide the owner with the right—but not the obligation—to
purchase an asset at a stated price within a specific time frame.
 Put options: These options provide the owner with the right—but not the obligation—to sell
an asset at a stated price within a specific time frame.

What is the option's use?

Traders use options to speculate and hedge. For example, a trader might hedge a bet on the price
increase of an underlying crypto by purchasing put options.

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What is the difference between American options and European options?

American options can be exercised anytime before expiration, but European options can be exercised
only at the stated expiry date.
How is risk measured in options?
The risk content of options is measured using four different dimensions known as "the Greeks." They
are Delta, Theta, Gamma, and Vega.

What are the three important characteristics of options?

The three important characteristics of options are as follows:
 Strike price: This is the price at which an option can be exercised.
 Expiration date: This is the date at which an option expires and becomes worthless.
 Option premium: This is the price at which an option is purchased.

Which is more profitable: a call option or a put option?

The use of options depends on the trader’s risk profile and bet. That said, call options can have
unlimited gains and losses limited to premiums. Put options have limited gains and limited losses.

What are the alternatives to crypto options?

The alternatives to cryptos are stock options, ETF options and index options.

How are options taxed?

Call and put options are taxed based on their holding duration. They incur capital gains taxes. Beyond
that, the specifics of taxed options depend on their holding period and whether they are naked or
covered.

Options Risks
Because options prices can be modeled mathematically with a model such as the Black-Scholes
model, many of the risks associated with options can also be modeled and understood. This
particular feature of options actually makes them arguably less risky than other asset classes, or at
least allows the risks associated with options to be understood and evaluated. Individual risks have
been assigned Greek letter names, and are sometimes referred to simply as "the Greeks."

What is the difference between « Options » and « Leverage » ?

The difference between « Options » and « Leverage » is quiet simple. If the market makes 30%, 40%,
50% moves while using leverage you get rekt or liquidated. While using options the most important is
the price at expirity and the maximum loss is the premium price, which is less than your account.

Key Takeaways
 A call is an option contract giving the owner the right, but not the obligation, to buy a
specified amount of an underlying crypto at a specified price within a specified time.
 The specified price is known as the strike price and the specified time during which a sale is
made is its expiration or time to maturity.
 You pay a fee to purchase a call option, called the premium; this per-share charge is the
maximum you can lose on a call option.
 Call options may be purchased for speculation or sold for income purposes or for tax
management.
 Call options may also be combined for use in spread or combination strategies.

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 There are four basic options trades: buying a call option, selling a call option, buying a put
option, and selling a put option.
 With call options, the buyer is betting that the market price of an underlying asset will
exceed a predetermined price, called the strike price, while the seller is betting it won't.
 With put options, the option buyer is betting the market price of an underlying asset will fall
below the strike price, while the seller is betting it won't.

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This topic is generally kept secret by big players, because it has a lot of positiv points, so make good
use of it and enjoy.

Stay safe people :-D

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