Binance is eager to bring you the widest range of products that you can use to take part in the crypto revolution. You could choose to trade on the spot exchange, margin, or Binance DEX. If you’re looking for more passive ways to increase your holdings, you could also lend your assets using Binance Savings, stake your crypto, and many more.
As far as derivatives go, you can trade on Binance Futures. But, now you can also trade options! This article will guide you through how you can trade options in our mobile app, available for both iOS and Android devices.
We’ll discuss briefly what options contracts are and how they work. But if you’d like to get a deeper dive into them first, check out What are Options Contracts?.
What are options contracts?
Options contracts are a type of derivative product that give you the right, but not the obligation, to buy or sell an asset at a specific price.
When you’re buying an options contract, you’re speculating on the price going in a direction. There are two types of options contracts: call options and put options. In the case of a call option, you’re expecting the price to go up. While in the case of a put option, you’re expecting the price to go down.
In other words, a call option gives you the right, but not the obligation, to buy the underlying asset at a specific price. A put option gives you the right, but not the obligation, to sell the underlying asset at a specific price.
What are American Options?
Binance lets you trade what are called American Options. This means that you can exercise your option any time before the expiration date.
Another popular style of options contracts are called European Options. These can only be exercised on the same day of expiry, or within a short timeframe of the expiration date.
What are options contracts used for?
Options may be used for speculation but more typically they’re used for hedging, a risk management strategy. When traders or investors are hedging, they are trying to protect their investment from events that could have a negative impact on it.
In the cryptocurrency markets, options can be useful for miners to hedge their cryptocurrency holdings. How does that work? Well, for example, they can buy put options. This way, if the value of their holdings goes down, they’ll still profit from their put options and mitigate some of their losses.
Now you have a brief understanding of what options contracts are. However, they can be very complicated to use. Be sure to understand the implications of your actions before you jump into trading them. It could be worth starting with smaller amounts to test out the waters.
Things to know before trading on Binance Options
An important thing to note before you start is that your options trading activity is tied to your Binance Futures account. This means that what you do with options contracts may affect your open futures positions. Take extra care when trading options to avoid unintended consequences to your futures positions.
Please note that there’s no order book on Binance Options. If you buy an option, it will remain valid until you either exercise it any time before the expiry date, or when the option expires.
Let’s go through some of the most fundamental concepts you’ll need to understand before trading:
Premium – This is what you’ll pay to buy the options contract. It’s deducted from your Binance Futures Wallet Balance.
Expiry Date – The duration of time until the option expires. You can choose between 10-minute, 30-minute, 1-hour, 8-hour, and 1-day options. So, if you buy a 30-minute option, you’ll have a 30-minute window to exercise it. If it expires, you’ll only lose the Premium you paid.
Strike Price – The price at which you’ve bought the option.
Close Price – The price at which you’ve exercised the option. This is also known as the Settlement Price.
How to trade options contracts on the Binance mobile app
1. Download the Binance app
If you haven’t already, download the Binance mobile app from this page. Options trading is available for both iOS and Android.
Log in to your Binance account in the app. If you don’t have an account, register and create one in minutes.
2. Activate your Futures account
Your Binance Options account is tied to your Binance Futures account. So, if you don’t have a Futures account, activate it, and you’re ready to trade options!
3. Start trading options contracts
Navigate to the Trades tab, and click on Options at the top.
Make sure you have funds in your Futures Wallet. If you don’t, click on the arrow icon on the top right to transfer funds from your Exchange Wallet to your Futures Wallet.
You can choose between options with 10-minute, 30-minute, 1-hour, 8-hour, and 1-day expiry. Select which one you’d like to buy. In this example, we’re going to buy a 1-hour call option, so we’re expecting the price to go up within the next hour.
Next, specify the contract size in the Quantity field.
Note that you’re defining it in the underlying asset of the contract which, in this case, is BTC. However, you’ll pay the Premium in USDT.
When you are ready, click on Buy Call.
Next, you will see a confirmation window. If everything looks good, click on Confirm.
So, what’s happening here? We’re buying a 1-hour call option for BTCUSDT with a quantity of 0.1 BTC at the price of 7069.75. The 2.18 USDT Premium is going to be deducted from our Futures wallet. If the price of Bitcoin goes up to 7091.58, we’ll break even.
4. Monitoring and closing positions
You can monitor your open positions under the Positions tab. Amongst what we’ve discussed earlier, you can check how much time you’ve got left until the option expires, and a current estimation of your unrealized PnL (profit and loss).
If you’d like to close the position (exercise the option), click on Settle on the right side of the Positions tab.
The option will be exercised once you click on Confirm.
You can check your previous options trades under the History tab.
Options contracts are derivatives that give traders the choice to buy or sell an asset in the future, regardless of the market price. But unlike Futures contracts, traders have the choice not to exercise the contracts.
While they can be used for speculative trading, the Binance Options contracts can be particularly useful in risk management strategies, such as hedging. Still, options contracts may be confusing for inexperienced traders, so it’s important to understand their mechanism before taking financial risks.