What is an Index Option in Crypto?
An index option in cryptocurrency is a derivative financial instrument that gives the holder the right (but not the obligation) to buy or sell a specific cryptocurrency index at a predetermined price before the option's expiration date.
Key Features of Index Options:
šµ Index-based: The index option is tied to the price movement of an index that includes a set of cryptocurrencies, such as Bitcoin, Ethereum, and other popular assets. This allows traders to speculate on the overall market movement rather than individual coins.
Types of Options:
ā Call Option: Grants the right to buy the index at a set price.
ā Put Option: Grants the right to sell the index at a set price.
šµ Risk Management: Index options enable investors to hedge risks associated with cryptocurrency price fluctuations and benefit from overall market dynamics.
šµ Flexibility: Traders can use index options for speculation or to protect their portfolios from adverse market movements.
