Crypto Options: The Basics

Call, put, strike, premium, implied volatility: understand how crypto options work and the very different risk faced by buyer and seller.

Trading · Avancé · 10 min read · Publié le September 28, 2026

The essentials

This guide is general information and does not constitute investment, legal or tax advice. Options are complex products, suited to people who already understand spot trading and leveraged products.

What is an option?

An option is a derivative: its value depends on the price of another asset, called the underlying (for example bitcoin or ether). There are two families:

The call (buy option): the right to buy the underlying at the strike price. The buyer of a call generally expects a rise.
The put (sell option): the right to sell the underlying at the strike price. The buyer of a put generally expects a fall, or seeks to protect an existing position.

Each option is defined by a few parameters:

The strike price: the price at which the buyer will be able to buy (call) or sell (put) the underlying.
The expiry: the date after which the contract is no longer valid.
The premium: the option's price, paid by the buyer to the seller at the time of the transaction.
The contract size: the quantity of underlying covered by one contract.

European and American options

An option's "style" indicates when it can be exercised:

European option: exercisable only at expiry.
American option: exercisable at any time up to expiry.

On the major crypto platforms, the European style is common. Deribit, often cited as the historical platform for bitcoin and ether options, specifies for example that its options are European-style, automatically exercised at expiry, at 8:00 UTC. The settlement price there is an average of the index price between 7:30 and 8:00 UTC, which limits the effect of a sudden move in the very last minute.

A European option is not "locked" until expiry: you can generally resell it (or buy back a sold option) on the market before that date. Only exercise is reserved for expiry.

Cash or crypto settlement

Two conventions coexist, and you need to know which one you're using:

Linear options: the premium and settlement are expressed in a stable currency. At Deribit, "linear USDC" options are settled in USDC, on several underlyings (BTC, ETH, SOL, XRP and others), with a contract size that varies by asset (1 BTC, 10 SOL, 1,000 XRP...).
Inverse options: the premium is quoted and settled in the crypto itself (in BTC for bitcoin options). Calculating the gain and the breakeven then becomes less intuitive, because your result is measured in BTC while the strike is in dollars. Deribit also states that, since August 1, 2026, its in-the-money inverse options are first settled into futures contracts at the strike price, which are themselves cash-settled.

To get started, linear options are easier to reason about: everything is counted in the same unit.

Intrinsic value and time value

An option's premium breaks down into two parts:

Intrinsic value: what immediate exercise would yield. A call with a $90,000 strike when bitcoin is worth $100,000 has an intrinsic value of $10,000. A call with a $110,000 strike has none.
Time value: the rest of the premium. It pays for the possibility that the option becomes profitable before expiry. It shrinks as expiry approaches and falls to zero on the settlement day.

An option is said to be in the money when it has intrinsic value, at the money when the strike is close to the current price, and out of the money when it has only time value. An option that is out of the money at expiry expires worthless.

Implied volatility, the engine of the price

An option's price depends on the underlying's price, the strike and the time remaining, but above all on expected volatility: the more the market expects big moves, the more expensive options are, because the probability that they finish in the money rises.

Implied volatility (IV) is the volatility "contained" in options prices: it is the volatility level that, plugged into a valuation model, gives back the price observed on the market. It is expressed as an annualized percentage.

Deribit publishes an index, the DVOL, which sums up the 30-day implied volatility of bitcoin and ether options in a single annualized figure. To get an order of magnitude for the expected daily move, divide by the square root of 365 (about 19). Deribit gives the example of a DVOL of 90, which corresponds to an expected daily move of about 4.5%.

Practical consequence: you can be right about direction and still lose money buying an option, if implied volatility falls after your purchase or if the move comes too late. Deribit sums up the logic this way: the buyer benefits from a rise in volatility, the seller gains when the market overestimates future volatility.

Buyer and seller: two opposite risk profiles

Position	Maximum gain	Maximum loss
Buying a call or put	High (theoretically unlimited for a call)	The premium paid
Selling an uncovered call	The premium collected	Theoretically unlimited
Selling a put	The premium collected	Strike minus premium (if the price falls to zero)

The buyer's side

The buyer pays the premium and that is all they risk. Their breakeven at expiry, for a linear option, is:

for a call: strike + premium;
for a put: strike − premium.

Example: a call with a $110,000 strike bought for $2,000 is only profitable at expiry above $112,000. A put with a $90,000 strike bought for $1,500 is only profitable below $88,500. For inverse options, the formula differs: Deribit gives, for a call, a breakeven equal to strike ÷ (1 − premium in BTC).

The seller's side

The seller (also called the "writer") collects the premium immediately, but commits to paying the difference if the option finishes in the money. Deribit describes a profile with "limited gain and (almost) unlimited risk." That is why the platform requires the seller to post margin (funds locked as collateral), recalculated continuously. If the market moves the wrong way, the required margin increases and the position can be liquidated, exactly as on a perpetual contract.

Selling options produces regular income most of the time, then sometimes very heavy losses during a violent move. It is the most deceptive profile for a beginner.

A concrete example: the covered call

The covered call means holding an asset and selling a call on the same quantity. You collect a premium in exchange for giving up part of the upside beyond the strike.

Assumptions (fictional figures, chosen for the example):

you hold 1 BTC, worth $100,000 today;
you sell 1 linear European call on 1 BTC, strike $110,000, expiring in 30 days;
you collect a premium of $2,000 (fees ignored).

At expiry, the total value of your position (1 BTC + premium − any call settlement) depends on the price of bitcoin:

BTC price at expiry	Position with the call sold	Position without the option
$90,000	90,000 + 2,000 = $92,000	$90,000
$105,000	105,000 + 2,000 = $107,000	$105,000
$110,000	110,000 + 2,000 = $112,000	$110,000
$130,000	130,000 + 2,000 − 20,000 = $112,000	$130,000

What the table shows:

Below $110,000, the call expires worthless: you keep your bitcoin and the premium, i.e. $2,000 better off than if you had simply held the BTC.
Above $110,000, you have to pay the call's intrinsic value ($20,000 if BTC ends at $130,000). Your position is capped at $112,000 (strike + premium), whatever level is reached.
On the downside, the premium only cushions $2,000: your breakeven versus the start is at $98,000. Below that, you lose money, almost as much as a plain holder.

The covered call is therefore not a "risk-free" strategy: it keeps most of the downside risk and caps the upside. Another practical point: on a platform, selling the call is subject to that platform's margin rules. The fact that you hold BTC elsewhere, for example in a personal wallet, does not "cover" the position in the platform's eyes.

Where crypto options trade

Crypto options exist on centralized platforms specializing in derivatives (Deribit being the best-known example), on some large general-purpose exchanges, on traditional regulated markets, and on a few decentralized protocols. These names are cited for illustration, not as recommendations.

Before opening an account, check:

the type of options offered (linear or inverse, European or American);
the contract size and available expiries;
the margin rules for short positions;
real liquidity (gap between bid and ask, volume on the strikes you're interested in);
the list of excluded countries. At the time of writing, Deribit's list of restricted jurisdictions includes in particular the United States, the United Kingdom and Canada, but not France. That says nothing, in itself, about the service's regulatory status in France.

The regulatory framework in France

In an analysis published in 2021, the AMF considers that a derivative product with a crypto-asset as underlying and settled in cash is a financial contract, and therefore a financial instrument. Consequences according to the AMF:

a provider offering these contracts to clients in France must comply with the rules applicable to investment services, including on authorization;
the transaction reporting obligations under the European EMIR regulation apply;
the advertising ban provided by Article L. 533-12-7 of the French Monetary and Financial Code for certain financial contracts also applies.

In practice, crypto options therefore fall under financial instrument regulation and not only crypto-asset regulation. A status obtained for spot crypto-asset services is not necessarily enough to offer derivatives. If you are approached by an ad or cold-calling for crypto options, that is a warning sign, and you can consult the lists published by the AMF.

Mistakes to avoid

Buying far out-of-the-money options because they're "cheap": their probability of finishing in the money is often low, and the whole premium can be lost.
Forgetting time value: an option loses value every day that passes, all else being equal.
Ignoring implied volatility: buying when IV is very high, for example just before an expected event, can be costly even if the price moves your way.
Selling options to "earn an income" without measuring the possible loss during an extreme move.
Confusing linear and inverse options: the breakeven and the result in dollars aren't calculated the same way.
Neglecting margin on short positions: a liquidation can happen before expiry.
Using a platform without checking its status under French and European law.

Key takeaways

A call gives the right to buy, a put the right to sell, at the strike price and by the expiry set; the buyer pays a premium to the seller.
A European option can only be exercised at expiry, an American option at any time; many crypto options are European.
The buyer risks at most their premium; the seller collects the premium but can lose much more, hence the margin requirements.
Implied volatility weighs heavily on options prices: being right about direction isn't enough.
The covered call adds income as long as the price stays below the strike, but caps the upside and leaves almost all the downside risk.
In France, the AMF classifies cash-settled crypto derivatives as financial instruments, with the authorization and advertising rules that go with them.

Sources

Compare services related to this topic

Crypto exchange comparison