An option is a type of derivative contract that grants buyers the right (but not the obligation) to buy or sell an underlying asset at a predetermined price (strike price) on a specified expiration date. To secure this right, buyers pay a premium when purchasing a call option (betting on price increases) or a put option (betting on price decreases).
Sellers of options are obligated to fulfill the contract if the buyer chooses to exercise it. In return, sellers receive the premium paid by the buyer.
👉 Discover how options trading works
Bybit offers USDT and USDC-settled options, simplifying margin calculations and profit tracking. These are European-style cash-settled options, characterized by:
- Expiration-only exercise: Executed solely on the expiration date.
- No physical delivery: Settled in cash, not the underlying asset.
- Auto-execution: Bybit automatically processes contracts at expiration.
- Settlement payout: Calculated as the difference between the final settlement price (30-minute index average before expiry) and the strike price.
Benefits of Trading Options
Risk Management & Profit Potential
- Leverage options to limit losses or amplify gains based on market direction.
- Use call options to capitalize on upward trends or put options as hedges against downturns.
Diverse Strategies
- Combine multiple option types to profit in bullish, bearish, or volatile markets.
No Funding Fees or Liquidation Risks
- Buyers avoid liquidation risks and funding fees.
- Sellers, however, face potential liquidation risks.
Bybit’s Option Tiers: Explore vs. Easy vs. Pro
| Feature | Explore (Beginners) | Easy (Intermediate) | Pro (Advanced) |
|---|---|---|---|
| Purpose | Simplified trading with recommended contracts. | Streamlined profit/loss analysis. | Full access to option chains & advanced orders. |
| Audience | New traders; those copying "whales." | Traders with basic option knowledge. | Experienced traders. |
| Contracts | High-volume options only. | All contracts. | All contracts. |
| Direction | Buy only. | Buy only. | Buy & sell. |
| Advantages | Whale-tracking; user-friendly interface. | Clear P/L visualization. | Customizable multi-leg orders. |
Key Option Terms
| Term | Definition |
|---|---|
| Call Option | Right to buy the asset at the strike price (bullish). |
| Put Option | Right to sell the asset at the strike price (bearish). |
| Strike Price | Predetermined price for exercise. |
| Expiry Date | Date the contract executes. |
How Call & Put Options Work
Call Option Mechanics
- Buyer: Profits if the settlement price > strike price (uncapped gains).
- Seller: Keeps the premium if the option expires worthless; faces unlimited losses if exercised.
Put Option Mechanics
- Buyer: Profits if the settlement price < strike price (max gain = strike − premium).
- Seller: Retains premium if unexercised; losses capped at strike price.
Option Order Types
Example 1: Call Option Trade
Scenario: BTC at $35,000; Anna buys a $37,000 call for $1,000.
- **If BTC hits $40,000**: Anna profits $2,000 ($40K − $37K − $1K premium).
- **If BTC drops to $34,000**: Anna loses the $1,000 premium.
Example 2: Put Option Trade
Scenario: BTC at $38,000; Ivan buys a $37,000 put for $800.
- **If BTC falls to $35,000**: Ivan gains $1,200 ($37K − $35K − $800 premium).
- **If BTC rises to $39,000**: Ivan loses $800.
FAQ
Q: What are European-style options?
A: They can only be exercised at expiration, unlike American options (exercisable anytime).
Q: How does Bybit calculate settlement prices?
A: Based on the 30-minute index average before expiry.
Q: Can I sell options on Bybit?
A: Yes, but only via the Pro tier.
Q: Are options riskier than spot trading?
A: Buyers risk only the premium; sellers face higher obligations.
Bybit’s options platform caters to all experience levels, offering tools for hedging, speculation, and strategic diversification. Start with Explore to learn or jump into Pro for advanced strategies.
🚀 Ready to trade? Explore Bybit Options today!