Options Pricing: How It Works & Why It Matters

At first glance, crypto options may appear to be a foreign concept … especially to the uninitiated. Though more technical than day-to-day trading, there’s no need to be intimidated — when broken down into bite-sized pieces of information, crypto options are, in fact, not as complex as you may think. For starters, let’s take a look at how crypto options are priced.

At its core, the price of a crypto option is determined by two key parameters: Intrinsic value and extrinsic value. In this article, we look at crypto option pricing, delving into the aspects which make a crypto option valuable. If, while reading this article, you feel confused at any point, just sit tight and read on till the end … we promise it will all eventually make sense.

What Are Crypto Options?

An option can be defined as “an agreement that confers the buyer the liberty (not the obligation) to exchange or buy a current or existing investment at a foreordained price before a particular date.” A crypto option follows the same underlying logic as a stock option, but has more potential for leverage.

Options have somewhat diminished the dangers and expenses associated with buying stocks. They’re a useful technique for trading digital assets. Options provide investors an amazing chance to anticipate or guess the future value of an underlying asset, which can then be purchased in fiat or digital currencies.