How to play options trading? A comprehensive explanation.

Recently, many people have been asking about Options, and there are actually three core points: the right to buy and sell, no obligation to execute, and making money from price differences.

Plain Language Version

Imagine you have your eyes on a house, and the seller says: “I give you an option to buy it at the price of 3 million within 30 days, but you don't have to buy it.” This “option” is called an option. To obtain this option, you need to pay a deposit (for example, 50,000), which is called the option fee.

The key point is: Most people do not really go to buy a house, but rather use this right to flip it for a profit. When the house appreciates to 3.5 million, your right becomes valuable, and you can directly sell it to someone else for a profit without actually needing to buy the house.

Two Main Gameplays

Bullish → Buy Call Options

• Expecting BTC to rise? Buy a Call
• The price has risen, the options have appreciated, selling will make a profit.
• If it doesn't rise, it only means losing the Options premium.

Bearish → Buy Put Options

• Think ETH is going to drop? Buy a Put
• The more it falls, the more valuable your Options become.
• If it doesn't drop, accept the loss of the options premium

Three Essential Elements You Must Understand

The exercise price is fixed, but the option premium fluctuates with market changes— the more active the market, the closer to the expiration date, and the greater the volatility, the more dramatic the changes in option premium.

Greeks Risk Indicators Overview

Professional traders use these Greek letters to measure risk:

• Delta (Δ): If the underlying asset rises by 1 unit, how much does the option rise?
• Gamma (Γ): The rate of change of Delta
• Theta (θ): Time decay, the closer to the expiration date, the more the option depreciates.
• Vega (ν): The higher the volatility, the more expensive the Options.
• Rho (ρ): The impact of interest rate changes

American vs European

• American Options: Can be exercised at any time (more flexible but usually more expensive)
• European Options: Can only be executed on the expiration date (more restrictions)

Gate uses European Options, with automatic cash settlement, without the need for actual asset delivery.

Risk Warning

Options are high-leverage tools that may lead to a total loss of principal. Understand the mechanism before engaging, and do not follow the trend blindly. The most common strategy is to trade options contracts to profit from the volatility spread, rather than actually executing the buy and sell of the underlying assets.