XTZ Options
XTZ Options
What are XTZ Options?
An XTZ Option is a financial contract that gives the holder the right, but not the obligation, to buy or sell the cryptocurrency XTZ (Tezos) at a specific price on, or before, a certain date. This right is attained in exchange for a cost, known as the 'premium'.
Categorization of XTZ Options
XTZ Options belong to the wider category of cryptocurrency options. They can be further broken down into two main types; call options and put options. A call option grants the right to buy XTZ at a specific price while a put option grants the right to sell XTZ at a specific price.
Why Trade XTZ Options?
Traders opt for XTZ Options because they offer multiple opportunities. They can be used to hedge against potential price drops, to speculate on the future price movements of XTZ, and to monetize holding positions.
Understanding XTZ Options Trading
When you acquire an XTZ Option, you pay the premium to gain the right to trade XTZ at the 'strike price'. If the market price moves favorably, you can exercise the option to generate profit. For instance, if you own a call option and the price of XTZ increases beyond the strike price, you can buy XTZ at the strike price and sell at the market price to gain the difference. Conversely, if you own a put option and the price of XTZ decreases below the strike price, you can buy XTZ in the market and sell it at the strike price to gain the difference.
Risks and Rewards of XTZ Options
XTZ Options, like other cryptocurrency options, carry both risks and rewards. The main risk is the loss of the premium if the price of XTZ does not move favorably. However, this risk is capped at the amount of the premium. The potential rewards, on the other hand, are theoretically unlimited in the case of call options if the price of XTZ increases without limit. For put options, the maximum profit is reached when the price of XTZ goes to zero.
