Crypto Options : What They Are, How They Work, and How to Get Started in 2025

What Are Cryptocurrency Options ?

In the cryptocurrency universe, crypto options are derivative financial contracts that give their holder the right, but not the obligation, to buy or sell a crypto asset at a predetermined price (called the strike price) before or on a specific expiration date. These instruments allow traders to develop complex strategies to profit from market movements, whether bullish, bearish, or sideways.

Crypto options work on the same principle as traditional options but apply to digital assets like Bitcoin (BTC) or Ethereum (ETH). There are two main types of options :

• Call options give the right to purchase the underlying asset at the strike price, ideal when anticipating a price increase.
• Put options confer the right to sell the asset at the strike price, preferred for protection against a decline or for speculating on a bearish market.

Unlike spot trading or futures, crypto options offer unique flexibility. The buyer is never obligated to exercise their right, limiting potential loss to the premium paid. This feature is particularly advantageous in the volatile cryptocurrency market.

How Do Crypto Options Work ?

The functioning of crypto options relies on precise mechanisms that allow traders to exploit different market configurations.

Essential Components

Each crypto option contract is defined by several key parameters :

• The strike price : price at which the holder can buy or sell the underlying asset
• The expiration date : deadline when the option ends
• The premium : cost of purchasing the option, influenced by volatility, the gap between current price and strike price, and time remaining
• The underlying : the cryptocurrency on which the option is based

Valuation Mechanism

To simply understand how an option is valued, think of it as insurance. The higher the risk, the more substantial the premium. In the world of crypto options, this value depends on two main elements :

• Intrinsic value : this is the immediate profit you would make if you exercised the option now. For example, if you have a Bitcoin call option at $100,000 while Bitcoin is currently worth $110,000, the intrinsic value is $10,000 (the difference between market price and strike price).
• Time value : this is the “bonus” traders are willing to pay for the future potential of the option. The more time left before expiration, the higher this value, as there’s a greater chance the price will move favorably. This value decreases gradually as the deadline approaches, like ice cream melting in the sun.

The total option price (the premium) is simply the sum of these two values. Trading platforms automatically calculate these prices using mathematical models like the Black-Scholes model, but you don’t need to understand these complex formulas to trade effectively.

Available Option Styles

In the world of crypto options, there are mainly two styles that differ in their exercise flexibility.

European options function like a ticket to a fixed-date event: you can only use them on the exact expiration date, not before. This is the most common style on exchange platforms. Their advantage is simplicity and generally lower cost.

American options are like a pass that can be used anytime until the deadline. You can exercise your right to buy or sell at any time before expiration. This additional flexibility comes at a price: they generally cost more than their European equivalents.

In practice, most traders don’t hold their options until expiration but resell them on the market when they’ve gained value, regardless of their style.

Risk Management

For option buyers, the maximum loss is limited to the premium paid, while the potential gain can be theoretically unlimited for a call. It’s the option seller who assumes a potentially greater risk, committing to sell or buy the underlying asset at the strike price if the buyer exercises their option.

The Best Platforms for Crypto Options Trading

Choosing the right platform is crucial to optimize your crypto options trading experience.

Deribit : The Undisputed Leader

Deribit dominates the market with over 85% of transaction volumes. Founded in 2016, the platform offers the most comprehensive range of options on Bitcoin and Ethereum, with different expiration dates and a multitude of strike prices.

Its major strengths include exceptional liquidity, advanced tools (implied volatility calculator, Option Wizard), competitive fees (0.03% to 0.05% for takers), and enhanced security (cold wallets, insurance fund).

Bitget Options : The Innovative Challenger

Bitget has recently entered the crypto options market with an innovative approach that combines ease of use and advanced features. The platform stands out with its copy trading system applied to options, allowing beginners to automatically replicate the strategies of experienced traders.

Bitget’s interface has been designed to be accessible while offering sophisticated analysis tools. The platform offers a complete range of options on Bitcoin and Ethereum, with varied expirations ranging from a few hours to several months.

A distinctive advantage of Bitget is its liquidity rewards program, which offers additional incentives to market makers, thus helping maintain tight spreads and good market depth.

Binance Options : The Complete Ecosystem

Binance offers the advantage of providing an ecosystem where traders can easily switch between spot, futures, and options. The platform focuses on short-term European options, with an interface more accessible to beginners and a fee structure favoring users of its BNB token.

Integration within the Binance ecosystem allows users to manage their entire crypto portfolio from a single interface, which significantly simplifies position management and strategy diversification. The platform also offers detailed tutorials and regular webinars to help newcomers familiarize themselves with crypto options.

Bybit Options : The Intuitive Interface for All Levels

Bybit has established itself as a major player in the crypto options market thanks to its user-centered approach. Launched more recently than its competitors, the platform has quickly gained popularity by offering a particularly intuitive interface that demystifies options trading.

One of Bybit’s strengths is its simplified trading system that allows even beginners to get started with options without being overwhelmed by technical complexity. The platform offers pre-built contracts for bullish and bearish markets, saving users from having to manually select strike prices and expiration dates.

The platform supports options on Bitcoin and Ethereum, with a gradual expansion to other major cryptocurrencies like Solana and Ripple.

Strategies for Crypto Options Trading

Crypto options offer a range of strategies adapted to different market scenarios. Here’s a more detailed overview of the main approaches you can adopt.

Simple Directional Strategies

Buying call options (Long Call) is the most intuitive strategy to profit from an anticipated rise. Imagine you think Bitcoin, currently at $90,000, will reach $110,000 in the next three months. Instead of directly buying Bitcoin, you could purchase a call option with a strike price of $95,000 for a premium of $5,000.

If Bitcoin indeed reaches $110,000, your option will be worth at least $15,000 ($110,000 – $95,000), representing a profit of $10,000 after deducting the premium paid. Your return would be 200%, significantly higher than the 22% you would have obtained by directly buying Bitcoin. And if Bitcoin falls, your maximum loss remains limited to the $5,000 premium.

Buying put options (Long Put) works similarly but to profit from an anticipated decline. For example, if you hold 1 Bitcoin at $90,000 and fear a correction, you could buy a put option with a strike price of $85,000 for a premium of $4,000.

If Bitcoin drops to $70,000, your option would allow you to “sell” at $85,000, limiting your loss to $9,000 ($5,000 decline + $4,000 premium) instead of $20,000. It’s like insurance that protects your investment.

Income Generation Strategies

Selling covered calls (Covered Call) is a popular strategy for generating passive income on your cryptocurrencies. Suppose you hold 1 Ethereum at $3,000 and think its price will remain stable or slightly increase. You could sell a call option with a strike price of $3,500 for a premium of $200.

If Ethereum remains below $3,500 until expiration, the option expires worthless and you keep the $200 premium, increasing your yield by 6.7%. If Ethereum exceeds $3,500, you’ll have to sell it at that price, but you’ll still have made a total profit of $700 ($500 appreciation + $200 premium).

Selling cash-secured puts is a strategy to acquire cryptocurrencies at a reduced price while generating income. For example, if you want to buy Bitcoin at $80,000 while it’s currently trading at $90,000, you could sell a put option with a strike price of $80,000 for a premium of $3,000.

If Bitcoin stays above $80,000, you simply keep the $3,000 premium. If Bitcoin falls below $80,000, you’ll have to buy it at that price, but your actual acquisition cost will be $77,000 ($80,000 – $3,000), a 14.4% discount from the initial price.

Spread Strategies to Limit Risk

The vertical bull spread (Bull Call Spread) is a strategy that reduces the cost and risk of a bullish position. It involves buying a call option at a certain strike price and simultaneously selling a call option at a higher strike price.

For example, you might buy a Bitcoin call at $95,000 for $5,000 and sell a call at $105,000 for $2,000. Your net cost would be $3,000 ($5,000 – $2,000), and your maximum gain would be $7,000 if Bitcoin exceeds $105,000 ($10,000 difference between strike prices – $3,000 net cost).

This strategy is ideal when you’re moderately optimistic and want to reduce your risk exposure, in exchange for a capped profit potential.

The vertical bear spread (Bear Put Spread) works on the same principle but for a bearish expectation. You buy a put option at a high strike price and sell a put option at a lower strike price.

Advanced Volatility Strategies

The straddle is a strategy that allows you to profit from a significant price movement, regardless of its direction. It involves simultaneously buying a call option and a put option with the same strike price and expiration date.

For example, if Ethereum is at $3,000, you could buy a call and a put at this strike price for respective premiums of $300 and $250, a total investment of $550. If Ethereum rises to $3,600 or falls to $2,400, you’ll make a profit (the $600 movement minus the total cost of $550).

This strategy is particularly effective before major events likely to cause high volatility, such as regulatory announcements or important technical updates.

The strangle is a variant of the straddle where you buy a call with a strike price above the current price and a put with a strike price below. This configuration is less expensive than the straddle but requires a larger movement to become profitable.

Calendar Strategies to Exploit Time

The calendar spread involves buying a long-term option and selling a short-term option with the same strike price. This strategy capitalizes on the faster time decay of short-term options.

For example, you might buy a 3-month Bitcoin call with a strike price of $95,000 and sell a 1-month call with the same strike price. If Bitcoin stays close to $95,000, the short-term option will lose its value more quickly, generating a profit.

This strategy is effective in sideways markets or when you anticipate a period of stability followed by a directional movement.

Advantages and Disadvantages of Crypto Options

Before diving into crypto options trading, it’s essential to understand the strengths and weaknesses of these sophisticated financial instruments. This knowledge will help you assess whether options match your investor profile and financial goals.

Advantages

1. Optimized risk management : maximum loss limited to the premium paid for the buyer, allowing controlled exposure to the volatile cryptocurrency market.
2. Controlled leverage effect : control of a significant amount of assets with modest capital, without the liquidation risk of traditional leveraged positions.
3. Strategy diversity : ability to build strategies adapted to all market scenarios (bullish, bearish, sideways).
4. Passive income source : generation of additional income on existing positions through covered option selling.
5. Volatility exposure : ability to directly trade volatility as a distinct asset class.

Disadvantages

1. Technical complexity : steep learning curve requiring understanding of concepts like time value, implied volatility, or theta decay.
2. Higher fees and spreads : generally lower liquidity than spot or futures markets, resulting in proportionally higher transaction costs.
3. Unfavorable time decay : constant erosion of time value working against option buyers.
4. Unlimited risk for sellers : potential exposure to theoretically unlimited losses for sellers of uncovered options.
5. Limited availability : deep and liquid options markets primarily for Bitcoin and Ethereum, with a more limited offering for altcoins.

What Is the Tax Treatment of Cryptocurrency Options ?

In France, the taxation of crypto options falls under the general regime for taxation of capital gains on digital assets.

The Flat Tax Regime for Individuals

For individual investors making occasional transactions, net gains are subject to the Flat Tax (PFU) of 30% (12.8% income tax + 17.2% social security contributions).

Losses can be offset against gains of the same nature realized in the same year. An exemption applies for capital gains less than €305 per year, but declaration remains mandatory.

The BNC Regime for Regular Traders

Traders conducting frequent operations may be considered as exercising a professional activity, with taxation in the category of Non-Commercial Profits (BNC) at the progressive scale that can reach 45%, plus social security contributions.

This qualification depends on criteria such as transaction frequency, amounts invested, time devoted to the activity, etc.

Declaration Obligations

French taxpayers must complete :

• The annual declaration of capital gains via form 2086
• The declaration of digital asset accounts held abroad via form 3916-bis

Non-compliance with these obligations can result in significant penalties. We encourage you to seek information based on your specific situation.

Review on Crypto Options in 2025

In 2025, crypto options have reached remarkable maturity, with volumes regularly exceeding $5 billion daily and increasing professionalization of market participants. This evolution has considerably improved liquidity and reduced spreads, making these instruments more accessible while maintaining their exceptional yield potential.

We consider crypto options as particularly powerful trading tools, offering an optimal balance between leverage and risk management. Their flexibility allows for the development of sophisticated strategies impossible to implement with other instruments, but this complexity also constitutes their main disadvantage, requiring a substantial intellectual investment.

These financial products are primarily aimed at experienced investors who already have a good understanding of crypto markets and are looking to optimize their performance. Institutional traders, portfolio managers, and knowledgeable individuals will find an ideal complement to their existing strategies, while beginners should first master the basics of spot trading before venturing into options.