OKX Options Introduction
OKX Options Introduction
1. What are options?
Options are derivatives that give the contract holder the right, but not the obligation, to buy or sell a specified quantity of an underlying asset at a specified strike price on a specified date in the future.
- The contract holder (buyer) can choose to exercise the option if he or she can benefit from doing so, and the contract writer (seller) will have to pay the relevant amount to the contract holder.
- If there is no benefit from exercising, the buyer can choose not to exercise it, and then the seller does not need to pay anything.
Here are some basics of options:
Underlying asset: asset for trading on which derivatives contract's price is based. For example, the underlying asset of Bitcoin options is BTC/USD index. OKX offers options on the underlying of Bitcoin, Ethereum.
Expiration date: the date on which options expire.
Strike price (or exercise price): the price at which the option holder can buy or sell an underlying asset when exercising a call or put option respectively.
Contract type: Call options give the holder the right to buy at a specified price while put options give the right to sell at a specified price.
Exercise Style: American Options can be exercised at any time prior to its expiration date. European options can only be exercised on its expiration date. OKX Options are European options.
Option premium: the price at which an option is bought or sold.
Options can be classified into in-the-money (ITM), at-the-money (ATM) and out-of-the-money (OTM), depending on the difference between the strike price and the price of the underlying asset.
| Contract Type | Relationship between S (final settlement price) and K (strike price) | ITM/ATM/OTM |
|---|---|---|
| Call options | S > K | ITM |
| Call options | S < K | OTM |
| Call options | S = K | ATM |
| Put options | S < K | ITM |
| Put options | S > K | OTM |
| Put options | S = K | ATM |
2. OKX Options Contract Specification
OKX offers two types of options that exist side by side:
- Coin-margined options (margined and settled in BTC or ETH, with an inverse payoff structure)
- USDⓈ-margined options (margined and settled in USD, USDC, or USDG depending on your eligible region, with a linear payoff structure).
The table below summarizes the key differences.
| Item | Coin-margined options (Inverse) | USDⓈ-margined options (Linear) |
|---|---|---|
| Exercise Style | European options | European options |
| Contract Expirations | 1, 2, 3, 4 dailies 1, 2, 3 weeklies 1, 2, 3 monthlies 1, 2, 3 quaterlies of the March, June, September and December cycle. For details, please click the Introduction to Options Expiration Dates |
1, 2, 3 dailies 1 weeklies |
| Underlying assets | BTC, ETH | BTC, ETH |
| Margin & settlement currency | Underlying coin (BTC or ETH) | USD, USDC, or USDG (depending on the user's eligible region) |
| Quotation currency | Underlying coin (BTC or ETH) | USD |
| Contract size | 1 BTC, 1 ETH | 1 BTC, 1 ETH |
| Contract multiplier | 0.01 BTC per contract; 0.1 ETH per contract | 0.01 BTC per contract; 0.01 ETH per contract |
| Tick size | 0.0001 BTC or ETH for options with prices under 0.005 BTC or ETH; 0.0005 BTC or ETH for options with prices above 0.005 BTC or ETH. |
BTC: 1 USD ETH: 0.2 USD |
| Mark Price | Determined by OKX using the Black model on a real-time basis. Implied volatility is derived from market data, along with the volatility cap and floor. | Determined by OKX using the Black model on a real-time basis. Implied volatility is derived from market data, along with the volatility cap and floor. |
| Settlement price | Time-weighted average price of the index price during the last 30 minutes before expiration. (The snapshot of the index price is taken at 200ms interval) Please refer to option settlement price history. |
Time-weighted average price of the index price during the last 30 minutes before expiration. (The snapshot of the index price is taken at 200ms interval) Please refer to option settlement price history. |
| Exercise Methods | Cash settled; ITM options are automatically exercised and settled at expiration | Cash settled; ITM options are automatically exercised and settled at expiration |
| Contract naming | underlying-expiration date-strike-type, e.g. BTC-USD-241231-50000-C | underlying-USD_UM-expiration date-strike-type, e.g. BTC-USD_UM-241231-50000-C |
| Expiry Time | expiry time at 8:00 (UTC+0) on the expiration date. | expiry time at 8:00 (UTC+0) on the expiration date. |
| Creation Time | Options with new expiration date are created at 8:30 UTC. | Options with new expiration date are created at 8:30 UTC. |
Common features (apply to both types): mark price determined by OKX using the Black model on a real-time basis (Linear Black for USDⓈ-margined options); 24x7 trading hours.
3. Comparisons between OKX options and futures
| Comparisons | OKX Coin-margined options | OKX USDⓈ-margined options |
|---|---|---|
| Rights and obligations | The buyer has the right, but not the obligation, to buy or sell the underlying asset after paying the premium. The seller has the obligation if the buyer chooses to exercise. | The buyer has the right, but not the obligation, to buy or sell the underlying asset after paying the premium. The seller has the obligation if the buyer chooses to exercise. |
| Margin requirements | The seller has to pay margin in the underlying coin (BTC or ETH). The buyer only pays a premium, no margin (not applicable for Portfolio Margin). | The seller has to pay margin in USD, USDC, or USDG. The buyer only pays a premium, no margin (not applicable for Portfolio Margin). |
| Potential risks | The buyer's potential gain is unlimited and the loss is limited to the premium paid. The seller's potential loss is unlimited but the gain is limited to the premium received. P&L is denominated in the underlying coin. | Same payoff structure as Coin-margined options, but P&L is denominated in USD (linear payoff). |