Zero days to expiration options (0DTEs), often referred to simply as zero-day options or zero-DTE options, are a type of financial derivative contract.

While trading zero days to expiration options isn’t new, its glamorization has gained plenty of traction, thanks to the spread of screenshots across social media featuring impressive gains and profits from trading such derivatives. From a mainstream media perspective, it seems that retail traders are becoming increasingly interested in the highly volatile derivative that is zero-day options. 

 as they buy up S&P 500-related contracts. Whether they’re driven by the fear of missing out (

) or greed, we may be seeing an entire mindset shift in the way retail traders are embracing the volatility of 0DTE options. From understanding the potential profits that can be reaped from the highly volatile derivative to grasping the risks involved when trading them, here’s everything you need to know when it comes to trading zero-day options in the crypto market.

What Are Zero Days to Expiration Options?

Zero days to expiration options (0DTEs), often referred to simply as zero-day options or zero-DTE options, are a type of financial derivative contract. What sets them apart from traditional derivatives is their incredibly short lifespan. Unlike traditional 

, which may expire in weeks or months, zero days to expiration options have an expiration period of just one trading day.

As 0DTEs tend to lead to significant volatility in option premiums throughout their lifespan of a single trading day, they’re often only traded by those experienced in crypto options trading. Labeled by some to be the "extreme sport" of the traditional options market, zero-day options are extremely time-sensitive, and require active monitoring by traders in order to avoid losing out on gains made from their options trades.

How Do 0DTE Options Differ From Traditional Options?

To better grasp the concept, let's compare 0DTE options with traditional crypto options. Traditional options contracts offer traders the right, but not the obligation, to buy (

) an underlying asset at a specified price (strike price) on or before a predetermined expiration date. Whether these crypto options are used for 

, they ultimately provide ample time for market conditions to evolve and for the options to gain or lose value over time.

Zero days to expiration options, on the other hand, cut out all the time between the purchase and the expiration. They’re settled on the same day they’re traded. This means that the price of the underlying crypto asset must move quickly and significantly in the desired direction in order for the crypto trader to profit from the risky trade. Due to the short lifespan of these options, they’re significantly cheaper than their traditional counterparts that have weeks or months to expiration.

One of the primary benefits of 0DTE options is their capital efficiency. Since 0DTEs have a very short duration, traders can allocate a smaller amount of capital as compared to traditional options. To further leverage their trades, crypto options traders tend to purchase out of the money (OTM) options contracts, which can be even more affordable given their low delta. This allows for more aggressive trading and risk management strategies, offering crypto traders the chance to make profits worth multiples of the capital they’ve committed to a trade.

Time decay, also known as theta, is part of the 

 and is a significant factor in options pricing. Traditional options lose value as time passes, but this effect is greatly reduced in zero days to expiration options. Since they expire the same day they’re traded, time decay has minimal impact, and crypto options traders can focus more on the directional movements of the underlying asset.

Risks Associated With Zero Days to Expiration Options

While 0DTE options are affordable and capital-efficient, they come with the trade-off of high volatility. They’re exceptionally sensitive to price swings in the underlying asset, which can lead to both rapid gains and losses, making them unsuitable for risk-averse traders who aren’t used to such volatility.

Traditional crypto options offer the luxury of time for traders to adjust their positions or strategies as market conditions change. This can include repairing an options trade by rolling the contract forward, or doubling down on an already established position. Unfortunately, 0DTE traders don’t get to enjoy this luxury. Once you enter a position, the clock is ticking as theta decay kicks in, and there's very little time to react to adverse movements in crypto prices.

How to Trade Zero Days to Expiration Options

While trading zero days to expiration options may sound simple, the risk of options trading is compounded, thanks to the huge volatility in option premiums and the chance of your purchased options contracts expiring worthless. To make 0DTE options trading more manageable, we’ve compiled some tips to give you a better understanding of what you’re getting yourself into — and to better prepare you for the possible risks ahead.

Trading zero days to expiration options requires careful selection of the underlying asset. It's crucial to choose assets known for their intraday volatility. Popular choices often include certain stocks, exchange-traded funds (

) or indices. With crypto options now becoming an increasingly popular niche among crypto traders, you’re free to explore all kinds of option strategies with Bitcoin and Ether acting as the underlying asset of said contracts. 

As ETH tends to behave more erratically as compared to BTC, the preference of choosing the right underlying asset ultimately depends upon your risk appetite and how comfortable you are with potentially owning the underlying asset. This might happen if the options contracts expire in the money (ITM). Find out more with Bybit’s 

Trading zero days to expiration options demands proper 

. Experienced crypto options traders often use techniques such as 

 to navigate through the volatility and come out on top. As these strategies rely on quick market movements and precise timing, 0DTE option trading tends to shine because gains and profits are maximized when a trade goes well.

Find the term “weeklies” familiar? If you’ve traded crypto options long enough, you’ll likely hear about weekly options, and how they’re also regularly days-traded. It's worth noting that zero days to expiration options aren’t the same as weekly options, which have longer expiration periods of about five trading days. While such weekly options provide more leeway as compared to zero-day options, they’re still shorter-term instruments than traditional options, and highly risky. That’s why crypto options traders should hold themselves to the same risk management techniques when trading such weekly options.

0DTE Options in Practice: Trading Short-Term Options

To illustrate the potential of zero days to expiration options, let's consider a hypothetical scenario in which a trader uses these options to capitalize on an upcoming blockchain network upgrade from the Ethereum Foundation. 

For our bull case scenario example, Ethereum once again pulls off a major upgrade that goes off without a hitch, while managing to capture the attention of retail traders who are FOMOing into the market. This will likely cause a short-term rally that drives up ETH prices. 

In this scenario, a crypto options trader can take advantage by purchasing zero-day OTM call options on ETH just before the announcement of the major network upgrade. If the upgrade does indeed go as planned, and the rally does in fact happen, ETH’s price may surge, resulting in significant profits for the trader within a single trading session. This is because the sudden ETH volatility will cause the call option premiums to greatly appreciate as ETH heads toward the strike price of the call options that the crypto trader just purchased.

On the flip side, for our bear case scenario example, if the crypto options trader has a more bearish mentality toward the future catalyst, zero days to expiration OTM put options on ETH can be purchased instead. 

The ideal scenario for this would be if the network upgrade is delayed and pushed back because of fundamental execution errors. This would likely cause fear in the short term as retail traders cast doubt on the Ethereum Foundation’s chances of successfully pulling off network upgrades without causing any disruption to blockchain activities. As a result, ETH prices would plunge, causing the 0DTE puts to suddenly be ITM, as ETH prices approach the strike price of the purchased put contracts.

Tips for Success With Trading Zero Days to Expiration Crypto Options

Success in trading zero days to expiration crypto options requires discipline, quick decision-making and thorough research. Here are some final tips for a better understanding and grasp of this high-risk strategy for trading options.

Develop a Clear Trading Plan and Manage Risk Effectively

 is essential for success when trading 0DTE crypto options. After all, you don’t want to be “bag holding” your options if things don’t play out as planned — since the value of these options can quickly decay if no action is taken. Holding these short-term options can be a real risk if one becomes overwhelmed by the sudden gains and losses incurred. From clear take-profit levels to initiating proper stop losses, a crypto option trader must be aware of these price levels when engaging with 0DTE options.

Know the Underlying of What You’re Trading

 thing you want to do when trading 0DTE crypto options is to fall into the FOMO trap — and simply buy according to what the majority of traders are trading. To succeed in taking advantage of the volatility that comes with upcoming catalysts, 0DTE crypto options traders must be aware of the catalysts for their underlying assets. This can include understanding what network upgrades are coming up for Ethereum, or the potential outcomes of lawsuits and legal battles with regulators for Bitcoin’s potential spot ETF.

Zero days to expiration options offer a unique and exciting opportunity for traders to capitalize on short-term market movements. Their distinct characteristics, such as reduced time decay and capital efficiency, make them a valuable addition to the options market. However, they come with high volatility and limited time for adjustment, making them a challenging instrument to master. As with any crypto trading strategy, 

 and a well-thought-out strategy are essential for success.

For more on crypto options trading, check out our comprehensive guide to mitigating portfolio risks and 

. Additionally, you may choose to read up on 

 and understand what happens when they expire OTM or ITM.

Frequently Asked Questions (FAQs) about Zero Days to Expiration Options

Are zero days to expiration options suitable for crypto beginners?

Due to their high volatility and rapid price movements, zero days to expiration options aren’t recommended for beginners. It's advisable to gain experience with traditional options strategies before attempting to trade 0DTEs.

Can I use zero days to expiration crypto options for long-term investments?

0DTE crypto options are designed for short-term trading and speculation. They aren’t suitable for long-term investment strategies because they expire within the same trading day on which they’re purchased or written.

What’s the minimum capital required to trade zero-day options?

The minimum capital required for zero-day options can vary, depending upon your chosen underlying asset and strike price. It's essential to assess your risk tolerance and consider the possible outcomes before going ahead with your 0DTE options trading plan.

What happens if my zero days to expiration option expires?

If your purchased 0DTE call option expires ITM, you’ll still enjoy a profit, since the underlying asset is bought at your selected strike price and sold to the trader who wrote the options contract at the prevailing last traded price. The reverse is true for 0DTE put options expiring ITM, as you sell to the put writer at a profit.

On the other hand, if your 0DTE call and put options expire OTM, you won’t need to do a thing, since these options simply expire worthless as the funds put toward paying for their premiums decay over time.

Intermediate

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What Are 0DTE Options: A Guide to Trading Zero Day Options

Bybit Easy Options is designed to simplify options trading, making it accessible and manageable for both beginning and experienced traders. Learn more here.

, often perceived as a complex and advanced financial strategy, has long been a domain reserved for seasoned traders. However, the landscape is changing with the introduction of platforms like Bybit Easy Options that democratize access to options trading. Bybit Easy Options emerges as a beacon for novice traders, offering a simplified entry point into the world of 

 without the daunting complexities typically associated with this form of trading.

Bybit Easy Options is a streamlined platform designed to simplify options trading, making it accessible and manageable for both beginning and experienced traders. 

This innovative feature of Bybit breaks down the barriers to entry, offering a user-friendly interface and simplified trading mechanisms.

Bybit Easy Options offers a simplified version of 

. Unlike standard options trading, which involves a myriad of strike prices, expiration dates, and the need for in-depth market analysis, Bybit Easy Options streamlines the process. Users can choose from a range of preset options based on market predictions, whether they believe the market will rise or fall. This binary choice simplifies decision-making and reduces the need for extensive market knowledge.

Trades on Bybit Easy Options are executed in a few simple steps. Users select an Option based on their market prediction, 

 and then wait for the Option to expire. The platform provides real-time data and easy-to-understand metrics, helping users make informed decisions without the need for complex analysis.

Bybit Easy Options has introduced several features to enhance the trading experience.

Simplicity and Accessibility for Beginners

The primary benefit of Bybit Easy Options is its accessibility. It opens the door to options trading for those who may have felt intimidated by the complexity of traditional options markets. This simplified trading process, coupled with an intuitive user interface, makes it an ideal starting point for beginners.

Opportunity Identification and Market Insight

Bybit Easy Options provides tools for tracking Options with large trades, which is a valuable feature for identifying potential trading opportunities. This insight allows traders to see where significant market movements are occurring and to make informed decisions based on these trends. For beginners, understanding these market dynamics is crucial, and Bybit Easy Options presents this information in an easily digestible format.

While Bybit Easy Options simplifies trading, it's important to acknowledge the inherent risks of options trading. The market's volatility can lead to rapid changes that can have an impact on the outcome of trades. Users need to be aware that, despite the simplified process, options trading involves a level of risk and should be approached with caution.

Excited to get started with Bybit Easy Options? Before doing so, you’ll need to first 

. If you’re unsure of how to sign up for a Bybit account, you can follow our detailed sign-up guide 

: Launch the Bybit app and ensure that you’re logged in. 

tab at the bottom of the screen, and then tap on 

 to navigate to the Bybit Options trading page. Here, you’ll be able to choose from three modes — Explore, Easy and Pro — depending upon your experience with options trading.

Explore Options is ideal for those looking to view top Option contracts by expiration, as well as top picks and other aspects.

To purchase the contract, simply tap on your desired contract card.

The available contracts under Explore Options are categorized as follows:

Easy Options is great for traders looking to skip the complex chart reading and market analysis and buy Option contracts directly.

: Select your preferred coin type from the drop-down menu.

: Decide on buying Call or Put by toggling between 

: Check out the contract card for key indicators such as 

: To view more details — such as Options Market Overview, Options Knowledge Base or Options Trading Overview — and to switch to different margin modes, tap on the ellipsis (...) at the top right-hand corner of the screen. 

mode, tap on the corresponding contract card to access the 

: Input the amount you would like to invest. Then, you’ll be able to view the 

Order Cost, Expiration Date, Profit Conditions, Profit Probability, Leverage 

 chart shown on this page presents the current market price, the PnL simulated based on the Mark price, the breakeven point and the optimal P&L situations under simulation. 

: After you’ve reviewed all of your order details, tap on 

Option Name, Current Ask1/Bid1 Price, 24-Hour Trading Volume of the Contract

button at the bottom left corner of the screen.

Pro Options presents a traditional perspective on Options contracts. Here, traders have the option to purchase or sell 

. By swiping left or right, they can select their preferred expiration date. As with the Easy Options mode, traders have the ability to tap on the ellipsis (...) for selecting various margin modes, adjusting preferences or experimenting with simulated options strategies.

Bybit Easy Options is an excellent choice for those new to options trading, or looking for a more straightforward trading experience. However, it's crucial for users to educate themselves about the basics of options trading and the specific features of Bybit Easy Options. As with any investment, it's advisable to start with smaller amounts and increase investments as you gain more experience and confidence.

Bybit Easy Options stands out as a user-friendly platform that lowers the entry barrier to options trading. Its simplified approach and educational resources make it an attractive option for beginners. However, as with all trading platforms, it comes with risks that should be carefully considered. Bybit Easy Options is a step toward making complex financial instruments more accessible to a broader audience, empowering more individuals to participate in the dynamic world of options trading.

Beginner

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Bybit Easy Options: A User-Friendly Gateway to Options Trading

A long-term options strategy, we explore covered calls in this article, including what they are, how they work, and more.

Are you looking for an investment strategy that allows you to generate income while mitigating risk? Covered calls might be the answer you’ve been searching for. In this comprehensive guide, we’ll take a deep dive into the world of covered calls, discussing their mechanics, implementation, benefits, drawbacks, and even tax considerations. By the end of this post, you’ll have a solid understanding of this versatile strategy, and be equipped to answer the question, “what is covered call?” to decide if it’s the right fit for your investment portfolio.

Covered calls are a popular options strategy that involves covered call writing, which means to sell covered calls on crypto you already own. This enables you to earn extra income from the premiums received, while you continue to own the underlying asset.

At the core of the covered call strategy are two essential components: the call option and the underlying cryptocurrency. We will delve into the specifics of each of these components.

A call option is a contract allowing the buyer to buy tokens or a futures contract at a set price (also known as the strike price), before the option’s expiry. This gives them the legal right to do so. Call options are priced using mathematical models such as the 

 or Binomial pricing models, with the price determined by parameters like:

The interplay between option pricing and the underlying cryptocurrency plays a key role in covered call strategies. A covered call strategy involves holding a long position while selling call options on that same cryptocurrency. This approach can provide potential income in neutral to bullish markets and may also offer a selling price above the current cryptocurrency price in rising markets.

Executing a covered call requires ownership of the underlying cryptocurrency, which guarantees that you can deliver the tokens if the option is exercised. In a covered call, you sell a call option on the crypto you already own, which serves as a ‘cover’ for the call option. This position provides downside protection and generates income through the sale of call options.

To sell a covered call, you must possess at least a percentage of the underlying crypto. Without ownership of the underlying crypto, it’s not possible to execute a covered call strategy.

Having understood the basics, it’s time to examine the procedure of implementing a covered call strategy. This involves selecting a stable cryptocurrency, selling call options with your chosen strike price, and setting an expiration date.

During this process, factors such as the cryptocurrency’s price stability, 

, dividend payments, and your intended result should be taken into account. By carefully analyzing these elements, you can optimize your covered call strategy for maximum income generation and risk management.

A key aspect of choosing a crypto for a covered call strategy is to prioritize stability and low volatility. Stable cryptocurrencies minimize the risk of price fluctuations and enable you to generate consistent income from selling call options. To evaluate a crypto’s stability and its potential impact on crypto prices, you can use the following tools:

Choosing low volatility crypto is particularly advantageous for covered calls, as it reduces the risk of the option being exercised. This strategy helps in creating a steady income flow while reducing the likelihood of losing the underlying crypto.

Picking the Strike Price and Expiration Date

Choosing the most suitable strike price and expiration date is a crucial step in your covered call strategy. The strike price should be chosen above the current cryptocurrency price, but within a range that you’re comfortable with. You may also want to consider using technical analysis to identify resistance levels on the chart to determine the best strike price.

When it comes to setting the expiration date, it’s important to balance income generation with risk management. Here are some considerations:

Selling covered calls offers several significant advantages, such as generating income and reducing risk. By selling call options, you can generate income from the premiums received while still retaining ownership of the underlying cryptocurrency.

We will now examine in greater detail these two main advantages of selling covered calls: generating income and mitigating risk.

Selling covered calls can generate additional income that supplements your investment returns. When you sell a call option, you receive a premium that can be retained as income. Furthermore, selling covered calls enables you to establish a predetermined sale price for the cryptocurrency and generate additional income periodically.

The average income potential when selling covered calls can vary, but traders generally aim to achieve a consistent monthly income of around $3,000 or $36,000 per year.

Covered calls can also help mitigate risk by providing downside protection and generating income. If the cryptocurrency price decreases, you still own the cryptocurrency and can benefit from any potential recovery. Additionally, by selling the call option, you receive a premium that can help offset potential losses.

It’s worth mentioning, though, that the downside protection offered by a covered call strategy is constrained to the received premium. This means that if the cryptocurrency price drops significantly, you may still incur losses.

Despite the benefits of covered calls, there are also potential drawbacks to consider. The two primary disadvantages of a covered call strategy are the capped upside and increased transaction costs.

We will now scrutinize these potential disadvantages and their effect on your covered call strategy.

The capped upside in a covered call strategy means that you may miss out on potential gains if the cryptocurrency price rises significantly. With a covered call, the upside potential is limited to the strike price plus the premium received from selling the call option. Consequently, if the cryptocurrency price surpasses the strike price, the additional gains will not be realized by the investor.

You can mitigate the risk of capped upside by choosing cryptocurrency with little potential for significant increases or by adopting a collar strategy. This involves buying a protective put option to restrict downside risk while selling a covered call option for income generation.

Transaction costs, such as commissions and fees, can eat into the profits generated from selling covered calls. These costs may include brokerage fees, commissions, and other charges associated with executing the trade. Consequently, it’s important for investors to factor in transaction costs when evaluating the possible profitability of covered calls.

To minimize transaction costs, consider using a low-cost broker or trading platform that offers 

Covered calls work best in situations of market stagnation or low volatility, where major price movements are unlikely. In these situations, you can maximize income generation and minimize risk by selling covered calls on stable, low-volatility cryptocurrency.

We will now examine the best situations for using covered calls, with an emphasis on market stagnation and low volatility.

 occurs during periods of minimal or no movement in the overall market. In such scenarios, the profitability of covered calls can be impacted due to limited potential for income generation and reduced option premiums. However, covered calls can still be profitable in flat markets, as they offer a way to generate income even when the market does not rise.

By selecting stable cryptocurrency with limited upside potential and selling covered calls on these crypto, you can capitalize on market stagnation and generate consistent income.

Low-volatility cryptocurrencies are ideal for covered call strategies, as they minimize the risk of the option being exercised. When volatility is low, the premiums received from selling call options tend to be lower, which reduces the probability of the cryptocurrency price reaching the strike price and the option being exercised.

By focusing on low-volatility crypto and selling covered calls on these cryptos, you can generate steady income while minimizing the risk of losing the underlying cryptocurrencies.

Tax Considerations and Retirement Accounts

Before you implement a covered call strategy, it’s crucial to contemplate the likely tax consequences and the involvement of retirement accounts like IRAs. Covered call strategies can offer tax benefits, but there are also restrictions to be aware of.

This section will cover the tax implications of covered calls and their application in retirement accounts.

The tax implications of selling covered calls can impact your overall investment returns. In the United States, profits from covered calls are generally considered short-term capital gains and are subject to taxation at your ordinary income tax rate. However, there may be tax benefits associated with selling covered calls within an IRA or other retirement account.

It’s always a good idea to consult with a tax professional or accountant for more specific guidance on the tax implications of selling covered calls and how to offset any losses you may incur.

Selling covered calls within an IRA or other retirement account can offer tax advantages, such as deferring or 

. However, there are limitations and restrictions associated with the use of covered calls in an IRA, which can vary based on the custodian and your eligibility to trade options.

Before employing covered calls in a retirement account, it’s crucial to seek advice from a tax professional or financial advisor to ensure compliance with any applicable rules and regulations.

To better understand the covered call strategy, let’s consider a real-life example. Suppose you own 100 tokens of a cryptocurrency, currently trading at $50 per token. You decide to sell a call option with a strike price of $55, expiring in 30 days, and receive a premium of $2 per token for the option.

If the crypto price remains below $55 at expiration, the call option will expire worthless, and you’ll keep the $200 premium as income. However, if the crypto price rises above $55, the call option may be exercised, requiring you to sell your tokens at the $55 strike price. In this case, you’d still keep the $200 premium and make a capital gain of $5 per token, resulting in a total profit of $700.

Covered calls are a versatile investment strategy that can help generate income and mitigate risk. By understanding the mechanics, implementation, benefits, drawbacks, and ideal scenarios for using covered calls, you can make informed decisions about whether this strategy is right for your investment portfolio. As always, consult a financial professional before making any investment decisions and consider the tax implications of your chosen strategy.

A covered call strategy involves selling out-of-the-money calls on the cryptocurrency owned, with the potential to earn income if the price stays below the strike price. The investor sells a call option against a long position in an asset and keeps the premium if the crypto finishes below the call's strike price.

When using a covered call strategy, losses may occur if the cryptocurrency price drops below the breakeven point. Furthermore, investors may miss out on opportunities for higher returns if the price rises above the effective selling price of the covered call. Therefore, it is important to calculate the static and if-called rates of return before entering into a covered call as these can indicate whether money will be lost or gained.

Closing a covered call before it expires can be a smart move if the cryptocurrency price has gone up significantly, since you can buy back the option for a profit due to the lower option premium. Additionally, you can take advantage of the price increase and sell another call with a lower strike price that will generate more option premium and increase the chance of making a net profit.

A covered call is an options strategy in which an investor holds a long position in an asset and writes (sells) call options on that same asset to generate income. For example, suppose an investor owns 100 tokens of XYZ cryptocurrency trading at $45 and wants to receive additional income in exchange for giving up upside potential. In that case, they can sell a near-month call option with a strike price of $50. If the cryptocurrency reaches this level, they will receive payment of the option premium in exchange for the option buyer taking ownership of the cryptocurrency.

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What is Covered Call? A Comprehensive Guide

What happens when options expire within the stated strike price? Can any action be taken to keep the option contract active? Learn more here.

The number one reason why some crypto traders tend to avoid trading 

 entirely is because they’re afraid of the complexities involved with options expiration. With the 

 in play, throwing expiration dates into the mix can certainly be daunting for anyone new to the world of derivatives learning how to extract the most profit when trading them. 

What happens to the crypto once the contract expires within the stated strike price? Can any action be taken to keep the option contract active? 

Find the answers to these queries and more with our ultimate guide to options expiration, as we explore what happens when options expire — and what you can do as an options trader if you’re faced with a low days-to-expiration options (DTE) contract.

 are contracts that grant the holder the right to buy or sell an underlying asset at a specific price on or before a predetermined expiration date. While options may provide traders with greater potential returns, they also carry significant downside risk. These factors are ultimately why options are seen as advanced financial 

 best suited to experienced traders who understand the risks involved.

Options are a derivative instrument, meaning that the price of an options contract is derived from the underlying asset. An option gives its holder the right (but not the obligation) to buy or sell a predetermined amount of the underlying asset at a specific price, known as the strike price, on or before the expiration date. 

 grants the holder the right to sell an asset for a specific price on or before the specified expiration date, while a 

 grants its holder the right to buy an asset at a certain price on or before the expiration date.

In exchange for this right, options contracts require payment of a premium. The premium is determined by several factors, including how much time is left until expiration and how far away from the strike price the asset is trading in relation to current market prices. 

 in options contracts look for prices of underlying assets to move above their strike prices before expiration, so they can realize a profit on their position. Conversely, traders with short positions in options contracts look for prices of underlying assets to move below their strike prices before expiration, so they can realize a profit on their position.

The ability to leverage gains with relatively small up-front costs makes options attractive instruments for many traders and investors. However, these same features can also lead to potential losses if the market turns against them. When trading with options it's important for traders to understand how these instruments work, so that they can make informed decisions about when and how much money they should risk with each trade — and protect themselves against any potential losses.

What Are Your Choices Before the Options Expiration Date?

On or before the option's expiration date, traders have several choices to consider, depending upon their market outlook and risk tolerance. Here are the possibilities:

One big reason why options sometimes strike fear among traders is the additional dimension of time that’s factored into the calculation of options premiums. Unlike simply trading shares on the equity market, the options you’re trading can possibly be worth nothing by the time they expire. This is because of their days-to-expiration (DTE), which can cause option premiums to vary considerably the further they are from expiration. 

Curious about what happens to options contracts when they expire? In the following section, we’ll take a look at various examples of options at expiration.

If the options contract is expiring in the money (ITM), meaning that the underlying asset is trading above or below the strike price (for call and put options, respectively), then it will automatically be exercised. This means that if you hold a bought call option, you’ll receive the agreed-upon quantity of the underlying asset at the specified strike price.

Short positions in options contracts will automatically be exercised as well, which can result in a loss if your short position is ITM at expiration.

If the options contract is expiring out of the money (OTM), meaning that the underlying asset is trading at or away from the strike price (for call and put options, respectively), then it will 

. No action needs to be taken, as the options contract will simply expire.

Options traders should note that when options are expiring OTM, it’s possible to receive some value from them by selling them in the open market before expiration. This can result in reduced losses for traders with short positions, and potential gains for traders with long positions. However, they must act quickly so that they can take advantage of this opportunity.

Options expiration dates are typically fixed for the third Friday of each month; however, this can vary depending upon the exchange and the underlying asset. In some instances, if there’s a demand, the asset may offer weekly options that expire every Friday so traders can take advantage of the added flexibility when it comes to contracts with different expiration dates to pick from. 

All in all, it’s important for traders to know when their options contract is set to expire so they can take appropriate action ahead of time if needed.

What Can You Do as an Options Trader Faced With Low Days to Expiration?

When faced with a low DTE options contract, traders have several choices, as outlined above. Each of these alternatives can be beneficial in different scenarios, depending upon the trader's market outlook and risk tolerance. It’s important to remember that options trading carries inherent risks, so it’s essential that traders understand how these instruments work before embarking on any of these strategies.

How to Choose the Right Options Expiration Date

Before you determine the optimal options expiration date, it’s first important first to understand the Greeks and how Theta plays a part in options premium calculations. 

In short, Theta refers to the rate of decline in the value of an option due to the passage of time. It measures the inevitable loss in the premium’s value as time passes. 

Because crypto options contracts have a fixed expiration date, each passing day represents one day less for an exponential move in the ideal direction as the contract heads toward maturity. That’s why Theta is represented as a negative number for long positions and as a positive number for short positions.

Now that we’ve established an understanding of Theta decay for options contracts, we can better understand the optimal days-to-expiration that crypto options traders must consider when deciding to purchase or write options. While traders typically have their preferences when it comes to DTE, some experienced options writers live by the 

 — because 45 DTE grants options short sellers the right balance of accelerating 

 decline, thanks to Theta decay and a large enough extrinsic value premium to warrant the trade entry.

This 45 DTE rule aside, personal preference will ultimately decide how one chooses their options expiration date. This is because long options traders have to decide whether to give enough time for the underlying crypto to move in the anticipated direction, and if that time is worth the additional premium. Conversely, short option traders will have to determine if the extra premium earned from Theta decay is worth the risk of the underlying asset’s price suddenly becoming volatile.

In an ideal environment, options traders should strive to keep their options from expiring, regardless of whether an option is expiring ITM or OTM. This is because traders will be sacrificing the extrinsic aspect of the options contract, which falls over time (thanks to Theta decay). However, there are situations when attempting to salvage a crypto options trade may do more harm than simply letting it expire. In such situations, it may make sense to simply let the options contract expire. For instance:

Options are powerful financial instruments with the potential to generate significant gains for experienced traders who understand how they work and the risks involved. The expiration date of options contracts is an important factor to consider, as it determines when the contracts will expire and whether they’ll be worth anything at the end. 

From explaining the intricacies of options expiration to going in-depth with Theta decay, we hope our guide has been helpful in aiding options traders like yourself assess your ideal DTE. 

When analyzing the cost and benefit of trading options (while taking volatility and Theta decay into account), there can be a fine line between deciding whether it’s preferable to salvage an options trade or simply let it expire. Regarding options expiration dates, crypto options traders must weigh their choices in light of the capital they’re risking and the potential upside that can come from that risk.

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Options Expiration: What Happens When Options Expire?

Bybit Options is excellent to hedge your crypto position. Here are some of the top reasons you should start with Bybit Options to maximize profits. 

Diversifying your investment portfolio is essential, and crypto options offer an excellent way to manage risk and take advantage of price fluctuations in the volatile crypto market. 

Crypto options function in the same way as traditional options in the stock market. Essentially, they confer on you the right, but not the obligation, to buy or sell your crypto assets at a predetermined price and time. Options contracts predominantly offer the choice to trade call options, which give a buyer the right to purchase an asset, and put options, which give a buyer the right to sell an asset. 

In fact, crypto options have gained popularity in recent years because they don’t require substantial capital in order to get started, and they're less risky yet have the potential to generate higher percentage returns than any other method. 

We understand there’s a learning curve for users who want to understand how the options market works. In this guide, we’ll examine the fundamentals of crypto options and see how Bybit Options is an ideal choice to get you started.

Bybit Options are European-style cash-settled Options in the form of derivatives contracts that give you the right to buy or sell an underlying asset at a predetermined price and date. Buyers are required to pay a premium for a Call or Put Option for the rights to the contract.

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