A binding contract that grants the holder the right, but not the obligation, to buy or sell a specified amount of Ethereum (ETH) at a fixed price (strike price) on or before a designated future date (expiration). These financial instruments enable leveraged exposure or risk management for ETH.
Mechanism
ETH option deals are transacted on specialized cryptocurrency derivatives exchanges or through institutional OTC desks, often initiated via Request for Quote (RFQ) protocols. The contract terms stipulate whether it is a call (right to buy) or a put (right to sell), the strike price, the quantity of ETH, the expiration date, and the premium paid. Execution typically involves either cash settlement or physical delivery of ETH, depending on the contract specifications.
Methodology
Participants utilize ETH option deals for various strategic purposes, including hedging existing Ethereum positions against adverse price movements, speculating on future price direction with controlled risk, or generating yield by selling covered call options. The use of options allows for capital-efficient exposure to ETH volatility and precise risk calibration within a broader portfolio management strategy.
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