What are crypto options?

Cryptocurrency options: what they are, how they work, and what they are used for

Spot trading instruments* allow traders to profit from changes in the value of crypto assets. However, they are more limited than some other types of trading.

* Spot trading instruments are tools that allow users to buy and sell cryptocurrencies and other assets at the current market price. When a transaction is completed, the buyer receives the purchased asset and can manage it at their discretion: hold, transfer, or sell it.

To expand their trading opportunities, traders use financial derivatives*, including cryptocurrency options.

* Financial derivatives are financial instruments whose value depends on changes in the price of an underlying asset, such as Bitcoin, stocks, or gold. They allow traders to profit from both rising and falling market prices, as well as protect their investments against potential losses. Owning the underlying asset is not required. Derivatives include options, futures, and other types of financial contracts.

What are cryptocurrency options?

Cryptocurrency options are financial derivatives that give their holders the right, but not the obligation, to buy or sell a crypto asset at a predetermined price on or before a specified date.

Crypto options do not require direct ownership of the underlying crypto asset. This eliminates the need for traders to store cryptocurrencies or manage private keys, thereby removing the associated risks.

Deribit was the first exchange to introduce crypto options, launching trading in Bitcoin (BTC) options back in 2016. In 2026, Deribit alone accounts for approximately 80–85% of the open interest* in BTC and ETH crypto options.

* Open Interest is a metric that represents the total number of outstanding contracts in the derivatives market that have not yet been closed, exercised, or expired. Each contract is counted only once, even though every transaction involves two parties: a buyer and a seller. Open interest can be expressed as the number of contracts, units of the underlying asset, or their monetary value.

In the first half of 2026 alone, the total trading volume of cryptocurrency options reached $867 billion. The market continues to grow steadily, with annual crypto options trading volume increasing by about 12% on average compared to the previous year.

Types of cryptocurrency options and how they work

There are two main types of cryptocurrency options: call options and put options. Both types of crypto options are characterized by the following parameters:

Underlying crypto asset — the cryptocurrency that the option holder has the right to buy or sell, such as BTC or ETH;
Strike price — the predetermined price at which the underlying crypto asset can be bought or sold when the option is exercised;
Expiration date — the date on which the cryptocurrency option contract expires;
Premium — the price paid by the buyer to acquire the rights granted by the option.

Cryptocurrency call options give traders the right to buy the underlying crypto asset at a predetermined price. Crypto call options become profitable when the price of the underlying asset rises sufficiently above the strike price. The potential profit from a call option is theoretically unlimited. However, if the underlying asset's price remains below the strike price, the trader incurs a loss.

Cryptocurrency put options give traders the right to sell the underlying crypto asset. To make a profit from a put option at expiration, the asset's price must fall sufficiently below the strike price. Otherwise, the trader loses money.

The potential profit from crypto put options is limited because the price of the underlying crypto asset cannot fall below zero. This is a key difference between call and put options.

The main feature of call and put options is that traders have the right, but not the obligation, to buy or sell cryptocurrency at a predetermined price. If exercising the option becomes unprofitable, they can choose not to. In this case, the trader's losses are limited to the premium paid when purchasing the cryptocurrency option.

For example, a trader purchases a BTC call option with a strike price of $85,000 when Bitcoin is trading at $80,000. To obtain the right to buy Bitcoin at the contractually agreed price of $85,000, the buyer pays the seller a fixed premium of $1,000. Two possible scenarios may follow.

1. If Bitcoin's price is above the strike price when the crypto option expires, for example, reaching $90,000, the trader can exercise the option and make a profit. In this scenario, the profit is calculated as the difference between Bitcoin's market price at the time of exercise, the strike price, and the premium paid.

$90,000 − $85,000 − $1,000 = $4,000.

2. If Bitcoin's price remains below the strike price, the crypto option is considered out of the money. In this case, exercising the option would be unprofitable. The trader can choose not to exercise the cryptocurrency option, limiting their loss to the fixed premium already paid.

Call and put options in crypto are also divided into two categories based on how they can be exercised:

European-style cryptocurrency options — contracts that can only be exercised on their expiration date;
American-style cryptocurrency options — contracts that can be exercised at any time up to and including their expiration date.

What are cryptocurrency options used for?

Investors use cryptocurrency options to manage their investment portfolios and protect themselves against unfavorable fluctuations in crypto asset prices. One primary application of crypto options is hedging, which reduces the risk of financial losses caused by changes in market prices.

For example, long-term cryptocurrency holders can purchase put options, which give them the right to sell a crypto asset at a predetermined price. If the cryptocurrency's market value drops sharply, the investor can exercise this right and sell the asset at the agreed price, even if it is higher than the current market price.

In turn, crypto call options can be used to hedge against rising cryptocurrency prices. For example, if a trader opens a short position expecting to profit from a decline in the asset's price, an unexpected price increase could result in losses. A purchased call option gives the trader the right to buy the cryptocurrency at a predetermined price, potentially offsetting some or all of the losses on the short position.

Analysts also use cryptocurrency options to assess market sentiment and investors' expectations regarding future price movements.

For example, analyzing the ratio of crypto call and put options can help determine whether market participants predominantly expect cryptocurrency prices to rise or fall.

As of October 2026, call options accounted for about 60% of total open interest in Bitcoin options, while put options represented about 40%. This ratio may indicate increased interest among market participants in strategies designed to benefit from rising Bitcoin prices.

Thus, cryptocurrency options serve not only as trading and risk-management tools but also as indicators of market expectations.