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Crypto Terms:  Letter O

What is Option?

Meaning:
Option - a financial contract that allows its holder to purchase or sell an asset without making a commitment.
easy
2 minutes

Let's find out Option meaning, definition in crypto, what is Option, and all other detailed facts.

An option is a type of financial contract that enables the holder to buy or sell a financial asset without committing to anything. Options have a fixed price (known as the strike price) and expiration date. They can be utilized to trade cryptocurrencies, indexes, and exchange-traded funds (ETFs), amongst other things. The regulations that govern options trading are determined by the style of the option.

Buy and sell activities are denoted as call and put in the options space. A call signal indicates that an option holder can buy an asset at a defined price and time. However, put and call option methods work in polar opposite ways.

Besides, it should be noted that options are traded in the options market. Even though these financial products carry a higher amount of risk than spot trading, they have a number of benefits.

For example, they can assist investors in properly deploying assets in order to maximize their profits. Also, because of their lower financial commitment, they may be less hazardous than futures or other forms of financial products. Besides, options are very adaptable, allowing for the construction of synthetics and, as a result, the expansion of investment opportunities.

There are two basic styles to choose from:

  • American
  • European

The distinction between the two is in how holders engage with the mechanism between the time of purchase and the point of expiration. American-styled options, for instance, allow holders to purchase or sell prior to the expiration date. European-styled options, on the other hand, solely permit holders to execute their rights on the expiration date.

Call options<\/strong><\/a> <strong>come into play when the price of an asset is expected to grow<\/strong>. That&rsquo;s when buyers make the call purchase. On the other hand, investors sell calls when it seems like asset prices will experience a decrease in value in the not so distant future;<\/li>\n<li>Meanwhile, <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-put-option/">put options<\/strong><\/a> are defined as <strong>sell orders that show if an option holder is prepared to liquidate their position<\/strong>. In essence, call options and put options are the opposite of each other;<\/li>\n<li>The <strong>strike price<\/strong> is the <strong>fixed price at which the digital asset is traded<\/strong>;<\/li>\n<li><strong>Greeks<\/strong> are <strong>specific symbols that allow to establish and evaluate the risks of options trading<\/strong>. For example, theta, also known as time decay, shows a change in direction of an option&rsquo;s value and time. On the other hand, delta indicates how the asset&rsquo;s price changes against one dollar. There are 5 Greeks in total within an options market.<\/li>\n<\/ul>","definition":"is a market where one can trade cryptocurrencies at a specific price or time.","status":"published","meta_title":"What is Options Market? Definition & Meaning | Crypto Wiki","meta_description":"Options Market meaning: Options Market - is a market where one can trade cryptocurrencies at a specific price or time.","meta_keywords":null}" :prev-section="{"id":576,"wikipedia_url":"https:\/\/en.wikipedia.org\/wiki\/Ethereum","level":"easy","author_id":1,"created_at":"2023-06-19T06:59:00.000000Z","updated_at":"2023-12-07T20:46:30.000000Z","slug":"what-is-optimistic-rollup","title":"What is Optimistic Rollup?","section":"O","keyword":"Optimistic Rollup","content":"<p>An optimistic rollup is a sort of <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-layer-2/">layer 2<\/strong> <strong>scaling solution<\/strong><\/a> that uses off-chain processing to reliably record layer 2 transactions. The mechanism distributes <strong>Merkle roots<\/strong> of the transactions that occur inside the rollup on a regular basis in order to refresh the \"state\" of the rollup on the key underlying chain.&nbsp;<\/p>\n<p>Before any changes are made to the state, <strong>a network of external validators holds the responsibility to ensure that the Merkle roots are accurate<\/strong>. If an anomaly occurs, the validator publishes a fraud-proof during the argument period, causing the system's configuration to be rolled back to its prior valid state.<\/p>\n<p>The major benefit of optimistic rollups over zero-knowledge alternatives is that they can back <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-smart-contract/">smart contracts<\/strong><\/a> in the same way that the underlying smart contract-enabled blockchain does. The rollup's native support for smart contracts implies that apps can be deployed considerably more easily, without the need for further programming.<\/p>\n<p>However, the biggest drawback, on the other hand, is that it takes longer for layer 2 users to be able to deposit their cash back to the underlying blockchain when compared to <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-zero-knowledge-rollup/">zero-knowledge rollups<\/strong><\/a>. It's a result of the fact that an optimistic rollup must depend on validators to verify the Merkle roots for fraud before the state can be changed. Therefore, there must be enough time for validators to verify and challenge the layer 2 activity.<\/p>","definition":"a scaling strategy for Ethereum that incorporates off-chain computation and state storage.","status":"published","meta_title":"What is Optimistic Rollup? Definition & Meaning | Crypto Wiki","meta_description":"Optimistic Rollup meaning: Optimistic Rollup - Optimistic rollups utilize off-chain processing to reliably record layer 2 transactions.","meta_keywords":null}" :model="{"id":577,"wikipedia_url":"https:\/\/en.wikipedia.org\/wiki\/Option_(finance)","level":"easy","author_id":1,"created_at":"2023-06-19T06:59:00.000000Z","updated_at":"2023-12-07T20:48:14.000000Z","slug":"what-is-option","title":"What is Option?","section":"O","keyword":"Option","content":"<p>An option is a type of financial contract that enables the holder to buy or sell a financial asset without committing to anything. <strong>Options have a fixed price (known as the strike price)&nbsp;and expiration date.<\/strong> They can be utilized to trade cryptocurrencies, indexes, and <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-exchange-traded-fund-etf/">exchange-traded funds (ETFs)<\/strong><\/a>, amongst other things.&nbsp;The regulations that govern options trading are determined by the style of the option.<\/p>\n<p>Buy and sell activities are denoted as <strong>call and put in the options<\/strong> space. A call signal indicates that an option holder can buy an asset at a defined price and time. However, put and call option methods work in polar opposite ways.<\/p>\n<p>Besides, it should be noted that options are traded in the options market. Even though these financial products carry a higher amount of risk than <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-spot-trading/">spot trading<\/strong><\/a>, they have a number of benefits.<\/p>\n<p>For example, they can assist investors in properly deploying assets in order to maximize their profits.&nbsp;Also, because of their <strong>lower financial commitment<\/strong>, they may be less hazardous than <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-are-futures/">futures or other forms of financial products. Besides, options are very adaptable, allowing for the construction of <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-synthetic-asset/">synthetics and, as a result, the expansion of investment opportunities.<\/p>\n<p>There are two basic styles to choose from:<\/p>\n<ul>\n<li><strong>American<\/strong><\/li>\n<li><strong>European<\/strong><\/li>\n<\/ul>\n<p>The distinction between the two is in how holders engage with the mechanism between the time of purchase and the point of expiration. American-styled options, for instance, allow holders to purchase or sell prior to the expiration date. European-styled options, on the other hand, solely permit holders to execute their rights on the expiration date.<\/p>","definition":"a financial contract that allows its holder to purchase or sell an asset without making a commitment.","status":"published","meta_title":"What is Option? Definition & Meaning | Crypto Wiki","meta_description":"Option meaning: Option - is a financial contract that allows its holder to purchase or sell an asset without making a commitment.","meta_keywords":null,"author":{"id":1,"user_id":1,"created_at":"2023-05-03T14:30:55.000000Z","updated_at":"2023-05-11T07:18:20.000000Z","title":"Editor-In-Chief","slug":"aaron-s-editor-in-chief","description":"<p>Having completed a Master&rsquo;s degree on Economics, Politics &amp; Culture for the East Asia region, Aaron has written scientific papers with a comparative analysis of the differences between US&rsquo; Western and Japan&rsquo;s Collective forms of capitalism, 1945-2020.<\/p>\n<p>With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He&rsquo;s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.<\/p>\n<p>Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain &amp; Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.<\/p>\n<p>Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.<\/p>","user":{"id":1,"first_name":"Aaron","last_name":"S.","email":"aaron@bitdegree.org","email_sanitized":"aaron@bitdegree.org","email_verified_at":"2023-12-01T09:40:20.000000Z","must_verify_email":false,"is_registered_with_wallet":false,"status":"active","country":"LT","last_connected_ip":"88.119.132.125","image_id":2641,"referral_token":"05TMu2NysXOCn525","referred_by":null,"created_at":"2023-05-03T14:30:55.000000Z","updated_at":"2024-01-09T15:22:21.000000Z","full_name":"Aaron S."}}}" :chapter-list="[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-blockchain.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/blockchain-101.jpg","rating":100,"sections":[{"chapter_id":1,"order":1,"slug":"what-is-blockchain","title":"What is the Blockchain?","status":"published","modified_content":null},{"chapter_id":1,"order":2,"slug":"decentralized-blockchain","title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","status":"published","modified_content":null},{"chapter_id":1,"order":3,"slug":"blockchain-transaction","title":"What is a Blockchain Transaction in Crypto?","status":"published","modified_content":null},{"chapter_id":1,"order":4,"slug":"crypto-fees","title":"The Different Types of Crypto Fees Explained","status":"published","modified_content":null},{"chapter_id":1,"order":5,"slug":"what-is-bridging-in-crypto","title":"The Key Notion Behind the Concept of Bridging in Crypto","status":"published","modified_content":null},{"chapter_id":1,"order":6,"slug":"types-of-blockchains","title":"Different Types of Blockchains: What to Look Out For?","status":"published","modified_content":null}]},{"id":2,"title":"Cryptocurrencies","slug":"cryptocurrencies","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-cryptocurrencies.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/cryptocurrencies-101.jpg","rating":100,"sections":[{"chapter_id":2,"order":1,"slug":"what-is-a-cryptocurrency","title":"What is a Cryptocurrency?","status":"published","modified_content":null},{"chapter_id":2,"order":2,"slug":"how-does-cryptocurrency-work","title":"How Does Cryptocurrency Work?","status":"published","modified_content":null},{"chapter_id":2,"order":3,"slug":"is-cryptocurrency-a-good-investment","title":"Is Cryptocurrency a Good Investment? The Pros & Cons","status":"published","modified_content":null},{"chapter_id":2,"order":4,"slug":"coin-vs-token","title":"Coin VS Token: How Do They Differ?","status":"published","modified_content":null},{"chapter_id":2,"order":5,"slug":"what-are-stablecoins","title":"What are Stablecoins, Altcoins & Wrapped Coins?","status":"published","modified_content":null},{"chapter_id":2,"order":6,"slug":"what-is-a-bitcoin","title":"Bitcoin: the Pioneer of the Crypto World","status":"published","modified_content":null},{"chapter_id":2,"order":7,"slug":"what-is-ethereum","title":"The Ultimate Blockchain for dApp Creation: Ethereum","status":"published","modified_content":null},{"chapter_id":2,"order":8,"slug":"what-is-cardano-in-crypto","title":"What is Cardano and What is It Used For?","status":"published","modified_content":null},{"chapter_id":2,"order":9,"slug":"what-is-shiba-inu-coin","title":"Shiba Inu: the Dogecoin 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Standards","status":"published","modified_content":null},{"chapter_id":3,"order":5,"slug":"how-to-buy-crypto","title":"From Fiat to Crypto: How to Buy Crypto for the First Time","status":"published","modified_content":null},{"chapter_id":3,"order":6,"slug":"fiat-to-crypto","title":"Taking Profits: Turning Crypto Into Fiat","status":"published","modified_content":null},{"chapter_id":3,"order":7,"slug":"how-to-use-crypto","title":"You\u2019ve Got Crypto: What Can You Do With It?","status":"published","modified_content":null}]},{"id":4,"title":"Crypto Wallets","slug":"crypto-wallets","updated":false,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-crypto-wallets.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/crypto-wallets-101.jpg","rating":80,"sections":[{"chapter_id":4,"order":1,"slug":"what-is-a-crypto-wallet","title":"What is a Crypto Wallet?","status":"published","modified_content":null},{"chapter_id":4,"order":2,"slug":"hot-wallet-vs-cold-wallet","title":"Hot Wallet VS Cold Wallet: Which One to Pick?","status":"published","modified_content":null},{"chapter_id":4,"order":3,"slug":"non-custodial-wallet","title":"What are Non-Custodial Crypto Wallets?","status":"published","modified_content":null},{"chapter_id":4,"order":4,"slug":"what-is-metamask","title":"Metamask: The Leading Non-Custodial Wallet","status":"published","modified_content":null},{"chapter_id":4,"order":37,"slug":"how-safe-is-cryptocurrency","title":"The Key Crypto Wallet Safety Practices: How Safe Can Crypto Be?","status":"published","modified_content":null}]},{"id":5,"title":"NFTs","slug":"nfts","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-nfts.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/nfts-101.jpg","rating":100,"sections":[{"chapter_id":5,"order":2,"slug":"how-to-trade-nfts","title":"NFT Trading: The Ins and Outs","status":"published","modified_content":null},{"chapter_id":5,"order":3,"slug":"buying-nft","title":"Tips and Tricks of Choosing the Right NFTs","status":"published","modified_content":null},{"chapter_id":5,"order":4,"slug":"how-to-store-nft","title":"How to Store NFTs: Best Practices","status":"published","modified_content":null},{"chapter_id":5,"order":5,"slug":"how-to-create-an-nft","title":"How to Create Your Own NFTs?","status":"published","modified_content":null},{"chapter_id":5,"order":6,"slug":"how-to-make-passive-money-with-nft","title":"Making Passive Money with NFTs","status":"published","modified_content":null}]},{"id":6,"title":"dApps & Defi","slug":"dapps-and-defi","updated":true,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-dapps.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/dapps-defi-101.jpg","rating":80,"sections":[{"chapter_id":6,"order":1,"slug":"what-are-nfts","title":"What are Non-Fungible Tokens (NFTs)?","status":"published","modified_content":null},{"chapter_id":6,"order":1,"slug":"what-is-defi","title":"What is Decentralized Finance (DeFi)?","status":"published","modified_content":null},{"chapter_id":6,"order":2,"slug":"what-is-defi-2-0","title":"DeFi 2.0: The New Version of Decentralized Finance","status":"published","modified_content":null},{"chapter_id":6,"order":3,"slug":"what-are-dapps-in-crypto","title":"What Are dApps and How Do They Work?","status":"published","modified_content":null},{"chapter_id":6,"order":4,"slug":"defi-dapps","title":"Picking the Right dApps: Dos and Don'ts","status":"published","modified_content":null},{"chapter_id":6,"order":5,"slug":"what-is-web-3-0","title":"Web 3.0: The Future of the Internet","status":"published","modified_content":null},{"chapter_id":6,"order":6,"slug":"what-are-smart-contracts","title":"What is the Core Purpose of Smart Contracts?","status":"published","modified_content":null},{"chapter_id":6,"order":7,"slug":"what-is-a-dao-in-crypto","title":"The Notion of a Decentralized Autonomous Ogranization (DAO)","status":"published","modified_content":null},{"chapter_id":6,"order":8,"slug":"what-is-staking-in-crypto","title":"What is the Goal of Staking Crypto Assets?","status":"published","modified_content":null},{"chapter_id":6,"order":9,"slug":"what-is-liquidity-pool-in-crypto","title":"What is a Liquidity Pool and How Does It Work?","status":"published","modified_content":null},{"chapter_id":6,"order":10,"slug":"what-is-automated-market-maker","title":"Automated Market Maker: the Cornerstone of the Decentralized Crypto Exchange Industry","status":"published","modified_content":null},{"chapter_id":6,"order":11,"slug":"what-is-yield-farming-in-crypto","title":"The Main Yield Farming Techniques","status":"published","modified_content":null},{"chapter_id":6,"order":12,"slug":"what-is-an-oracle-in-crypto","title":"Crypto Oracles: The Link Between Blockchain and Outside World Data","status":"published","modified_content":null},{"chapter_id":6,"order":13,"slug":"crypto-gambling","title":"The Peculiarities of Decentralized Crypto Gambling","status":"published","modified_content":null},{"chapter_id":6,"order":14,"slug":"what-is-the-metaverse","title":"Metaverse: A New Perception of Reality","status":"published","modified_content":null}]},{"id":7,"title":"Trading & Investing","slug":"trading-and-investing","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-crypto-trading.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/crypto-trading-101.jpg","rating":80,"sections":[{"chapter_id":7,"order":1,"slug":"where-to-trade-crypto","title":"Where Can You Trade 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Analysis","slug":"crypto-analysis","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-crypto-analysis.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/crypto-analysis-101.jpg","rating":100,"sections":[{"chapter_id":8,"order":1,"slug":"what-is-bullish-and-bearish","title":"Bearish and Bullish Markets: Do They Matter?","status":"published","modified_content":null},{"chapter_id":8,"order":2,"slug":"best-technical-analysis-indicators-for-crypto","title":"5 Best Crypto Technical Analysis Indicators You Must Know About","status":"published","modified_content":null},{"chapter_id":8,"order":3,"slug":"what-is-candlesticks","title":"Technical Analysis: What are Candlesticks, Trendlines, and Patterns?","status":"published","modified_content":null},{"chapter_id":8,"order":4,"slug":"how-to-track-new-crypto-coins","title":"Crypto Tracking: How to Track Your Favorite Coins & Tokens?","status":"published","modified_content":null},{"chapter_id":8,"order":5,"slug":"how-to-research-crypto","title":"Crypto Research Fundamentals & Social Signals: Your Daily Trading Strategy","status":"published","modified_content":null},{"chapter_id":8,"order":46,"slug":"portfolio-diversification-definition","title":"Portfolio Diversification: The Whats, the Whys, and the Hows","status":"published","modified_content":null}]},{"id":9,"title":"Mining","slug":"mining","updated":false,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-crypto-mining.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/crypto-mining-101.jpg","rating":80,"sections":[{"chapter_id":9,"order":1,"slug":"what-is-crypto-mining","title":"Crypto Mining: What It is and How Does It Work?","status":"published","modified_content":null},{"chapter_id":9,"order":2,"slug":"what-is-a-mining-pool","title":"Mining Pools: Is Collective Mining Better Than Solo Mining?","status":"published","modified_content":null},{"chapter_id":9,"order":3,"slug":"what-is-staking-crypto","title":"An Advanced Look into What is Staking Crypto","status":"published","modified_content":null},{"chapter_id":9,"order":4,"slug":"what-is-proof-of-stake-vs-proof-of-work","title":"Proof-of-Work VS Proof-of-Stake: The Differences That Matter","status":"published","modified_content":null},{"chapter_id":9,"order":5,"slug":"what-is-crypto-mining-rig","title":"Crypto Mining Rig: What It is and How to Build One?","status":"published","modified_content":null}]},{"id":10,"title":"Crypto Terms","updated":false,"chapter":"crypto\/assets\/crypto-book\/chapters\/crypto-101-glossary.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}]" current-chapter="O" current-section="what-is-option">