common-close-0
BYDFi
Trade wherever you are!

What is the difference between OTM and ITM options in the cryptocurrency market?

avatarLuan BrandãoDec 26, 2021 · 3 years ago3 answers

Can you explain the difference between out-of-the-money (OTM) and in-the-money (ITM) options in the cryptocurrency market? What are the key characteristics and implications of each?

What is the difference between OTM and ITM options in the cryptocurrency market?

3 answers

  • avatarDec 26, 2021 · 3 years ago
    Out-of-the-money (OTM) options in the cryptocurrency market refer to options contracts where the strike price is higher than the current market price of the underlying asset. These options have no intrinsic value and rely solely on the possibility of the underlying asset's price moving in a favorable direction before the expiration date. OTM options are generally cheaper to purchase, but they also carry a higher risk of expiring worthless if the market doesn't move in the desired direction. Traders who buy OTM options are speculating on significant price movements in the underlying asset. 😉
  • avatarDec 26, 2021 · 3 years ago
    In-the-money (ITM) options in the cryptocurrency market are options contracts where the strike price is lower than the current market price of the underlying asset. These options have intrinsic value and can be exercised immediately for a profit. ITM options are more expensive to purchase compared to OTM options, as they already have some built-in value. Traders who buy ITM options are typically looking for more conservative strategies, as these options provide a higher probability of profit. 🙂
  • avatarDec 26, 2021 · 3 years ago
    BYDFi, a leading cryptocurrency exchange, explains that understanding the difference between OTM and ITM options is crucial for successful trading. OTM options offer higher potential returns but come with increased risk, while ITM options provide a higher probability of profit but at a higher cost. It's important for traders to consider their risk appetite and market expectations when deciding between OTM and ITM options. 👍