An option is a contract that represents the right to buy or sell an underlying asset at an agreed-upon price for a specific period of time.
Concepts
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Call options: Calls give the purchaser of the option the right to buy asset from the writer of the option in the future.
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Put options: Puts give the purchaser the right to sell asset to the creator of the options contract at a set price in the future.
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Premium: All options contracts are sold for a fee called a premium.
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Strike price: The contract defines a specific price for the trade, called the strike price.
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Expiration date: This deadline, or expiration date, is the final moment the options contract may be executed.
Common DeFi Options
| Strategy | Market View | Seller | Buyer |
|---|---|---|---|
| Covered Call | Moderate | Neutral to Bearish | Very Bullish |
| Put Selling | Moderate | Neutral to Bearish | Bearish |
Covered Call Seller
- When Settle Price ≦ Strike Price, you gain
- When Settle Price > Strike Price, you may lose
Put Seller
- When Settle Price ≧ Strike Price, you gain
- When Settle Price < Strike Price, you may lose