[The explanation assumes you are the buyer of the option]
Buying an option lets you potentially enjoy unlimited profits, while limiting your risk to the non-refundable premium paid upfront (Premium Payable). When you buy an option, you pay the Premium Payable for the right to trade an underlying asset such as Bitcoin (BTC) and Ethereum (ETH) at your set price (Strike Price) on your set date (Settlement Date). If options settle Out-The-Money on the Settlement Date, the rights return to the Seller.
Sparrow offers buying of Call and Put options on BTC and ETH. The Premium Payable is non-refundable and denominated in Sparrow Dollars (SP$), the settlement token of Sparrow.
Why are premiums paid in SP$?
SP$, as the settlement token in Sparrow, helps in simplifying and standardizing the trade settlement process for greater liquidity despite the customized nature of the contracts. Traders can easily value and make better decisions across Sparrow Option contracts.
Definitions
Buying a Call option (Buy Call)
Gives you the right to buy an underlying asset at the Strike Price on the Settlement Date. Buying a Call option implies that you believe the Settlement Price of the underlying asset would be greater than the Strike Price.
Buying a Put option (Buy Put)
Gives you the right to sell an underlying asset at the Strike Price on the Settlement Date. Buying a Put option implies that you believe the Settlement Price of the underlying asset would be lesser than the Strike Price.
Learn more about
- Boosting your trades with crypto options
- Buying a Crypto Option Contract
- Buying Crypto Call Option (Buy Call)
- Buying Crypto Put Option (Buy Put) - Selling a Crypto Option Contract
- Selling Crypto Call Option (Sell Call)
- Selling Crypto Put Option (Sell Put)
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