🧐What is Options Trading?

FAQs

• What is Options - Classic?

• What is Options - DNT?

• What is the difference between Classic Options and DNT Options?

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What is Options - Classic?

1. Classic Options contracts in crypto give traders the right (but not the obligation) to buy or sell an asset at a set price within a specific timeframe.

2. There are two types: call options for buying and put options for selling.

3. Traders use options to hedge against volatility or to speculate with limited risk. However, options can expire worthless, so choosing the right strike price and expiration date is crucial.

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What is Options - DNT?

1. Options DNT is structured with two price levels (upper and lower), and both of these levels are set above and below the current market price of the crypto asset.

2. The primary condition for the option to pay out is that the price of the asset must never touch or breach either of these two levels during the option's lifetime. This means the price must remain between the two levels for the entire duration of the option.

3. If the price of the cryptocurrency stays within the two specified boundaries (i.e., it does not "touch" either level), the holder of the option receives a predetermined payout at expiration. If the price hits or exceeds one of the levels, the option expires worthless.

4. DNT options are typically used by traders who believe the price of the cryptocurrency will remain stable within a certain range and will not experience extreme volatility that would push it past the upper or lower barriers.

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What is the difference between Classic Options and DNT Options?

The main difference between classic options and Double No Touch (DNT) options lies in their structure, payout conditions, and how they are used in trading. Let’s break it down:

1. Basic Structure:

• Classic Options (Call and Put options):

  • Call: Buy asset at a set price.

  • Put: Sell asset at a set price.

  • These are based on the price moving up or down.

• Double No Touch Options:

  • Involves two price barriers.

  • Pays out if the price stays within these levels without touching either one.

2. Payout Conditions:

• Classic Options:

  • Call: Payout if the price is higher than the strike price.

  • Put: Payout if the price is lower than the strike price.

  • Expires worthless if out of the money (price does not reach the strike price for calls or puts).

• Double No Touch Options:

  • Payout if the price stays between the two barriers.

  • Expires worthless if the price breaches either barrier.

3. Risk and Strategy:

• Classic Options:

  • Bet on price rising (Call) or falling (Put).

  • Clear profit potential based on price movement

• Double No Touch Options:

  • Bet on price staying stable within a range.

  • Higher risk if price touches either barrier.

4. Market Conditions for Use:

• Classic Options:

  • Best for volatile markets with expected price movement.

• Double No Touch Options:

  • Best used in low-volatility or sideways market.

5. Premiums and Payouts:

• Classic Options:

  • Premium based on volatility and time until expiry.

  • Potential for large payouts if the price moves significantly

• Double No Touch Options:

  • Higher premium due to the added risk.

  • Fixed payout if price stays within the range.

Summary of Differences:

Feature	Classic Options	Double No Touch Options
Type of Option	Simple, directional (Call/Put)	Two barriers (upper and lower)
Payout Condition	Profit if price is above/below strike price	Profit if price does not touch or breach either barrier level
Market Expectation	Expect price to rise (Call) or fall (Put)	Expect price to stay within a range (low volatility)
Risk	Limited to the premium paid	High risk if price touches/breaches barriers
Use Case	Common in volatile markets	Common in stable or range-bound markets
Premium	Depends on volatility and time to expiry	Higher premiums due to higher risk

In short, classic options are simpler and are based on the price moving in a specific direction, while Double No Touch options are more complex and require the price to remain within a specific range without touching the predefined barriers.