Plain vanilla options

A European call option gives the holder the right, not the obligation, to buy the underlying asset at a certain date (known as expiry) for a certain price (known as a strike price). A European put option thus gives the holder the right to sell the underlying asset at expiry for a strike price. Expiry date, strike price and contract size are up to the client.

Example of a call option

Today is 19th October 2022. The Bitcoin price is at USD 19'000.

Bob thinks that within a month, it will break out from the bear flag and jumps to the USD 23'000-USD 25'000 area.

Weary of the downside risks, he doesn't want to be long a Bitcoin perpetual future with leverage and instead chooses to play his view by buying a 25th November expiry 2022 at-the-money call option with the strike at USD 19'000.

He buys 10 BTC USD 19'000 25.11.2022 call options for USD 1'690 each, thus paying a total premium of USD 16'900. This is the maximum he could lose (as opposed to buying futures where the potential loss is USD 190'000).

Generally one of three outcomes is possible:
If the BTC price at expiry is between 19'000 and 20'690, Bob will receive the 10x difference between the price at expiry and the strike price (19'000), but this profit will not cover option cost, so overall Bob's PnL will be negative but not more than the option premium paid.

If Bob proves to be right, and Bitcoin does indeed break out to the upside, and the price at expiry (25.11.2022) will be above 20'690, Bob will receive 10x difference between price at expiry and strike. His profit will cover premium paid and total PnL will be positive. So in case the price will reach 23'100, Bob's PnL will be 10x(23'100 - 19'00) - 16'900 = USD 24'100.

If Bob is completely wrong and price at expiry will be below 19'000, there will be no payoff from the option, but Bob's loss is still limited by premium paid.

Example of a put option

Today is 19th October 2022. The Bitcoin price is at USD 19'000.

Bob thinks the crypto winter has just started, and the Bitcoin price will go down below USD 15'000 in 3 months.

He is concerned about a potential margin call and wants to avoid going short via bitcoin perpetual leveraged futures. Aware of the upside risk, he instead prefers to buy a put option striking at USD 17'000 30th December 2022 expiry (slightly out-of-the-money to get more leverage).

He buys 10 BTC USD 17'000 30.12.2022 put options for USD 1'050 each, thus paying the total premium of USD 10'500. This is the maximum he could lose (as opposed to buying futures where the potential loss is unlimited).

Bob proves to be right. The market faces a strong selloff, and the price at expiry (30.12.2022) is at USD 11'200.

His profit on each contract at expiry is, therefore USD (17'000 — 11'200) = USD 5'800. And the overall position given x 10 = USD 58'000.

Given premium paid his net PnL is USD 58'000 — USD 10'500 = USD 47'500.

Option typeEuropean
UnderlyingPhinom BTH index, Phinom ETH index
Quote currencyUSDC
StrikeUnderlying price set in contract
Expiry8:00 UTC of the Expiry date specified in contract
Expiry spotAverage of the Underlying price over the last 30 minutes before the Expiry
Quote periodAny date before 24h from Expiry
SettlementCash settled
Minimum price tick size0.01
Mininum contract sizeBTC0.1
Early terminationAvailable, at unwind price
Payoff amountCall optionContract_size * Min(Expiry Spot - Strike, 0)
Put optionContract_size * Min(Strike - Expiry Spot, 0)

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