What are Bitcoin options? How to calculate the income of Bitcoin options?

In addition to common Bitcoin contracts and currency transactions, Bitcoin options have also become a new investment tool, providing investors with higher-yield but also higher-risk trading tools. It is a derivative product based on Bitcoin contracts that allows investors to speculate or hedge in markets with volatile prices. But the most important thing to know when playing Bitcoin options is to understand how to calculate the income of Bitcoin options? According to the data, its income is mainly divided into buying options, selling options and option closing. Different options have different algorithms. The editor below will tell you in detail.

How to calculate Bitcoin option income?

Bitcoin option income can be divided into three types: buying options, selling options and option closing. It should be noted that early closing is based on the average opening price and the average closing price to calculate the closing price for you. The profit of the position is calculated for you based on the underlying price you purchased and the settlement price on the expiration date.

The profit calculation formula is as follows:

Buy option position profit=(mark price-average opening price)*contract multiplier*number of pieces

Sell option Position profit = (average opening price - mark price) * contract multiplier * number of contracts

option closing profit income = (average closing price - average opening price) * position * contract multiplier

Example:

①A buys 100 BTC options, the buying price is 0.01BTC, the current option mark price is 0.02BTC, income = (0.02-0.01)*0.01*100=0.01BTC

②B sells 100 ETH options. The selling price is 0.2ETH. The current option mark price is 0.1. Profit = (0.2-0.1)*0.1*100=1ETH

Exercise income :

Call option exercise income = (Underlying price - Exercise price) / Underlying price * Contract multiplier * Number of contracts

Put option exercise income = (Exercise price - Underlying price )/Underlying price*Contract multiplier*Number of contracts

In fact, after including the option premium, the buyer’s income is calculated as:

The exercise income of buying a call option=(Underlying price-Exercise price)/underlying price*contract multiplier*number of contracts-option fee

The exercise income of buying a put option=(exercise price-underlying price)/underlying price*contract multiplier*number of contracts-option fee

The seller's income is calculated as:

The exercise income of selling a call option = option fee-(exercise price-underlying price)/underlying price*contract multiplier*number of contracts

Selling put option exercise income = option fee - (underlying price - exercise price)/underlying price * contract multiplier * number of contracts

For example: Xiao Ming bought 20 contracts on the platform The call option on BTCUSD-20200925-7000-C costs an option premium of 0.01 BTC. By 16:00 on September 25, 2020, the final BTC price was US$10,000, and Xiao Ming earned a total of (10,000-7,000)/10,000*0.01*20=0.06 BTC. Subtract the 0.01 BTC option fee spent. Xiao Ming finally got 0.05 BTC

What does the Bitcoin option mean?

Bitcoin options are a type of financial derivative that allow investors to buy or sell Bitcoin at a specific price at a certain time in the future. An options contract gives its holder the right, but not the obligation, to buy (call option) or sell (put option) a certain number of bits at a certain time in the future (expiration date) at an agreed price (strike price) currency.

A call option gives the holder the right to purchase a certain amount of Bitcoin at a predetermined price on the expiration date. If the market price of Bitcoin is higher than the exercise price at expiration, the holder can make a profit by exercising the option to purchase Bitcoin at a price below the market price.

A put option gives the holder the right to sell a certain amount of Bitcoin at a predetermined price on the expiration date. If the market price of Bitcoin is lower than the exercise price at expiration, the holder can make a profit by exercising the option to sell the Bitcoin at a price higher than the market price.

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