Intraday Option

What is an Intraday Option?

An Intraday Option is a type of financial instrument used in trading, particularly in the world of cryptocurrencies. To put it simply, these are contracts that grant the trader the right, but not the obligation, to buy or sell a specified cryptocurrency at a predetermined price within the same trading day.

Understanding the Intraday Option Concept

In general, options are derivatives, meaning their value is linked to the price of an underlying asset. Here, the underlying asset is a cryptocurrency. When you buy an intraday option, you're essentially making a bet on the price movement of the underlying cryptocurrency within a set period - the trading day. You might think that the price of the cryptocurrency will rise or fall, and accordingly buy a call (an option to buy) or a put (an option to sell).

Benefits of Intraday Options

Trading with intraday options in cryptocurrencies carries multiple benefits. For one, Intraday Options offer flexibility. Traders can decide how much risk they are willing to take on by setting the expiry period to their preference. Additionally, profits can be made irrespective of the market directions. Whether the prices of cryptocurrencies go up or down, the opportunity to make profits is present if your predictions are correct.

How Intraday Options Work in Cryptocurrency Trading

Let's take a real-world example. Assume you've purchased an intraday option on Bitcoin because you believe its value will rise. If by the end of the day, the price of Bitcoin has indeed climbed higher than the specified amount in your option contract, you can exercise your option and buy Bitcoin at the lower price specified in your contract. If you were correct, you would make a profit.

Risks of Intraday Options

Yet, trading with Intraday Options is not without risks, especially in the volatile cryptocurrency market. If your predictions do not materialise within the trading day, the option becomes worthless, and you lose the money you paid to buy the option.