CoinDCX Guide / What are options contracts?

What are options contracts?

It is a type of a derivative product that provides the trader the right for selling and buying an asset at a specific price in the future. It is not an obligation though. The main difference between futures and options is that there is no obligation to settle options contracts. When an option contract is bought, it is with a certain speculation of the price moving in a certain direction. 

Call and Put are the two types of option contracts where in a call option, the bet is that price could go up while the price could go down in the case of put options. They also derive their value from the value of an underlying asset such as commodities, stocks, market indices, cryptocurrencies, etc. Option contracts support risk management methods and complex trading strategies such as hedging. Miners of cryptocurrencies use options for hedging their large holdings to protect themselves from losing their funds.