4.1 Introduction to crypto call options - Deribit Options Course Basics

hopefully you're beginning to internalize how a call option works by now in this section we'll be adding an extra layer to what you've learned so far by moving on to cryptocurrency call options we will be looking specifically at the cryptocurrency options available on darabit for the most part these cryptocurrency call options work exactly the same as the call options we've covered so far the buyer of a bitcoin call option for example is purchasing the right to buy bitcoin just like the call options we covered in section three there is one important difference though the cryptocurrency call options on darabit use the cryptocurrency itself as collateral not dollars as in the previous section this means that your account balance will be in bitcoin for example rather than us dollars any profits or losses will also be paid and received in bitcoin while this seems on the face of it to be a minor difference it leads to an interesting difference in of the options when calculated in bitcoin the payoffs now have a curve to them rather than the previous linear payoffs don't worry if you're not really sure what that means we will explain how it works in this section including some live examples using the cryptocurrency itself as collateral also leads to a difference in the break-even point and maximum profit or loss calculations it's important to be aware of these differences particularly when making the jump over to cryptocurrency options from options in traditional markets to competently trade any instrument you need to be fully aware of how and where you will make a profit where your risk lies and the magnitude of each these differences we're going to work through in section 4 are not specific to bitcoin or even cryptocurrency they arise simply because we are using the underlying asset itself as the collateral and any profit or loss is also paid in this same asset the same formulas would apply if we were using facebook shares as collateral for trading facebook options or amazon shares as collateral for amazon options we are using the base currency for collateral and payments rather than the quote currency the profits are still calculated in the quote currency usd but they are paid in the base currency btc you can think of any tradable currency or asset pair as the price of the base currency quoted as an amount of the quote currency