Crypto Futures VS Options - Which is better futures or options?


Crypto futures

Crypto futures, as well as options, allow traders numerous advantages that can drive their growth in the crypto market. Options are low-risk while futures are typically more economical. When you decide which one suits you the best, the decision would be based on how much risk you can take and what your liquidity consideration stands at. 

Both futures and options are interesting options for crypto investors as they give the choice of taking calculated risks by speculating on prices with a lot of deliberation. This also leads to an increase in the rate at which digital assets trading. Gone are the days when trading was carried out only by financial gurus, with futures and options, anyone can arm themselves with the right knowledge and start trading. 

 

Let’s talk about crypto futures and how they work

You wish to make the most of changing prices and at the same time, you want to bring down volatility. That’s when you pick crypto futures as an investment since they’re derivatives where an asset is traded at a predetermined price on a pre-set date. It is something that both buyers, as well as sellers, mutually agree on. 

 

Note that the futures contracts are not a reflection of the overall value of your crypto asset. Essentially, you do not even have ownership of a cryptocurrency like Bitcoin that you may have invested in. Since you’re carrying out a trade on predetermined conditions, the economic perks that come with buying an actual cryptocurrency do not apply here. 

 

What basically happens in trading crypto futures is that you’re rewarded on the basis of speculations. Thus, you can keep your funds and trades safe from market movements that may not always be in your favour. In simple terms, it wouldn’t be wrong to equate trading futures contracts with betting since the ultimate result comes to the forefront as per your expectations. Depending upon what the trading signals indicate and how much your appetite for risk is, you could choose to open long or short positions. If you expect a price rise, you could go long while if the pricesseem to be going down, you could choose to have a short position. 


Irrespective of what the outcome is, your contract will end at the pre-decided date and both the buyers as well as the sellers must settle accounts. 


In general, the futures market allows traders to use leverage. If you opt for leveraged trading you could use borrowed funds to open a position without having to put all of your actual funds at stake. You only have to pay an initial margin to open a position. 

 

Types of futures contracts:

It is helpful to learn about the different features and offerings of various futures contracts to make it easier to choose the right option:

USD-Marginated Futures Contracts

USD-pegged coins are used to settle these contracts that support both deliveries as well as futures. Users could even stick to a position without worrying about an expiry date by investing in a perpetual contract. 

Coin-Margined Futures Contracts

Coin-Margined Futures Contracts allow users to choose between a perpetual and a deliverable contract. In this type of future, investors may quote as well as settle in many different cryptocurrencies. They also quickly respond to market bull runs and ensure maximum profit

 

Futures benefits and differences

Crypto futures and options come with advantages and disadvantages. Thus, being informed will help you make better trading decisions:

Cost-Effective

You must know that crypto futures are very economical. They do not require you to pay a sum as a premium immediately before the contract has been issued. It implies that the cost of your contract will be lowered without cutting into your rewards when the market moves in your favour. 

Time Resistance

Futures contracts mature at a certain point for which the price and the date are already set. This suggests that time does not play a negative role when it comes to contract valuation as you’re saved from the risk of executing at the wrong time. A trade is completed only on the expiry date of the contract. 

Size

The futures market is an old one and has thus many investors who have been a part of it for several years. This in turn makes the market size much larger as a result of which, large volumes of cryptocurrencies are traded here. 

High Liquidity

As the futures market has a bigger space as compared to the options market, there is more liquidity and accessibility. Liquidity could be rather low in the options market which could be a problem, particularly when there are big trades that must be executed. 

 

Crypto options and how they work

 

Participants trade cryptocurrencies as options because they represent a low-risk, low-cost alternative. This is especially true when it comes to options trading, such as standing swaps and cryptocurrency futures.

 

Crypto options trading is yet another form of derivatives through which buyers and sellers can determine the price and time of the trade-in advance. The right to buy is known as a ‘call’ while the selling right is termed as ‘put’. Options function in a similar way to derivatives. They let traders speculate and earn from the changing prices. Like the futures market, traders can also settle their trades here. 

 

Options benefits and differences

Reduced Loss and Low Risk

Bear in mind that futures contracts are weighed much earlier and are already prepared for execution at the predetermined date. They could be risky since you cannot precisely find out whether you will make a profit or a loss. Thus, it can be tricky to curb your losses through hedging. 

But with options, you can take stock of the situation and see your loss potential too. With long options, you already know the premium before you enter a trade. They are generally less risky than futures. 

Execution Freedom

An options contract may give the buyer a right but by no means are they under an obligation to carry out the trade. This implies that a buyer can actually take possession of the underlying asset in profitable situations unlike in futures. 

Great Flexibility

You are not obliged to execute a trade even after taking on a long position as is the case with futures that have to be settled after maturity.

 

 

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