Risk Warning: Options(derivatives) are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how options work and whether you can afford to take the high risk of losing your money.
- Multiple Crypto options
- American Option Trading Style
- One Single Fee
- friendly interface
- Easy to use
- Expiration date is up to 1 day
Table of contents
- Binance tutorial
- What is Binance Options?
- Crypto Options Products
- Crypto options settle periods are:
- How does it differ from traditional options?
- Binance Alternatives
- Risk and Reward Profile of Bitcoin Options
- How do they differ from existing crypto options?
- Binance Options Fees
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Binance is a cryptocurrency exchange that provides a platform for trading various cryptocurrencies. Founded in 2017 which quickly became one of the largest cryptocurrency exchange in the world in terms of trading volume.
The trading platform is the leading crypto exchange with over 100 coins supported for deposit and withdrawal.
Binance supports crypto; spot trading, margin trading, futures, trading and crypto options trading.
In this review I’ll cover Options trading and the main things you need to know before signing up.
Today, there are over 15 million users registered on Binance, securing its status as an industry leader.
What is Binance Options?
Binance Options are a simplified version of traditional options, it is designed to enhance a user’s trading experience and lowers the entry barrier for retail users. Moreover, they are intuitively designed and provide flexibility to option traders.
In addition, Binance Options are American-style options. The options can be exercised any time before the expiry date. It is also worth noting that Binance Options are cash-settled. Therefore, the physical delivery of the underlying asset is not required.
Crypto Options Products
Binance options offer the ability to trade with XRP/USD, ETH/USD and BTC/USD, BNB/USD, LINK/USD,LTC/USD
They are currently the only exchange that is supporting XRP option trading.
As of today, Binance Options tracks only three underlying assets:
- BTCUSDT perpetual contract
- XRPUSDT perpetual contract
- BNB/USDT perpetual contract.
- LINK/USDT perpetual contract.
- ETH/USDT perpetual contract.
- LTC/USDT perpetual contract.
Example of BTCUSDT contract specifications of the platform crypto Options.
A crypto Options contract will remain valid until the holder exercises the option any time before the expiry date or when the option expires. Therefore, users do not have access to an order book as the only way out of a contract is by settlement.
The exchange enable users to trade via their computer or via mobile app.
Users must have an Android version 1.23.3 and above or if you have an iphone users
You will need IOS Version 2.12.0 and above.
Ability to trade on ETH, BTC, LINK, BNB, LTC and XRP options
Crypto options settle periods are:
- 5 minutes
- 10 minutes
- 30 minutes
- 1 hour
- 4 hours
- 8 hours
- 12 hours
- 1 day
You can also secure your profit by setting a price target.
Moreover, the platform also provides a 5 minutes video that explains how options works upon requesting to trade via Options.
In order to ensure that users are suitable to use options, the crypto exchange requires users to answer 14 quiz questions to ensure that users are adequate to use crypto options.
How does it differ from traditional options?
In traditional options markets, traders can choose to be an option holder or writer. For instance, an option holder has the right to buy or sell the underlying asset at a pre-set price before the expiration date. On the other hand, option writers are counterparties who have an obligation to deliver the underlying asset at a pre-set price to the option buyer.
For Binance Options, the exchange is the sole-issuer of the product. Thus, users can only be a buyer of Binance Options. As option holders, users of the exchange Options are not exposed to unlimited downside, unlike traditional option sellers. In this case, the maximum loss would be the premium paid for the options.
The traditional options products typically offer multiple ranges of expiration dates and strike prices. As such, it is not uncommon to have hundreds of option contracts tracking a single underlying asset.
This market structure creates a fragmented liquidity landscape, where contracts that are far out-of-the-money and furthest away from the expiration date are notoriously illiquid. As such, trading with those contracts may pose challenges to transaction costs and trade execution.
In contrast, Binance Options provide only one strike price, which is equivalent to the price of BTCUSDT perpetual contract on Binance Futures. Therefore, users need not go through the hassle of choosing over a range of strike prices and expiration dates. In other words, Binance Options are always ‘at-the-money’.
Also, traditional options offer long-term durations, which may stretch up to 100 days and beyond. In contrast, Crypto Options provides a shorter time-frame ranging from 10 minutes to 1 day. Binance Options offer a unique opportunity for investors to trade with expiry windows as small as 10 minutes apart, providing a wider selection of trading strategies to users.
Risk and Reward Profile of Bitcoin Options
The exchange has drawn comparisons with exotic options products such as Binary options, probably because of the short-term durations that it offers. However, it is worth noting that Binance Options do not adopt a fixed pay-off structure that is embedded in Binary options.
With Binance Options, the expected payoff is variable. As the price of the underlying asset moves beyond the breakeven price, Binance Options may offer unlimited upside potential with limited downside risk. In other words, profits gained from Binance Options are not capped.
Despite the differences between Binance Options and traditional options, the risk to reward profile of Binance Options share similar characteristics to traditional options.
How do they differ from existing crypto options?
The most contrasting difference between Binance Options and existing crypto options is that Binance Options are American-style while existing options are European-style. This feature distinguishes Binance Options from others as American-style options allow users to exercise the options any time before the expiry date. In traditional options markets, American-style options are normally worth more than other types of options, this is because of the flexibility that it offers. Thus, it is common to have American-style options trading at a premium to European-style options.
Binance Options Fees
On Binance Options, the strike price is equivalent to the price of BTCUSDT, XRPUSDT and ETHUSDT perpetual futures contract. Thus, the strike price may vary according to price changes in the underlying. For this reason, premiums will vary as well. Therefore, it is not directly comparable against existing European-style options, which are designed differently and have predetermined strike prices.
However, under conditions where both options have identical strike prices, premiums are comparable. In fact, when considering the total cost of acquiring an option and the flexibility that American-style options offer, Binance Options may be a cheaper choice.
To illustrate the difference, let’s consider a scenario where a trader wants to purchase BTC options at the current spot price of $6875.
To buy a call option on Binance, it would cost a trader $140 for a 24-hour American Option at the strike price of 6875, $140 represent 2.02%
From all points of view, we really like Binance Options offerings.
Binance Options are straightforward and intuitively designed. Binance Options simplify options trading as it eliminates the need to keep track of multiple expiry dates and strike prices.
All in all, we really liked the platform, but what really kicked Binance to the top of the list for us was how Binance Options offers access to high leverage with no liquidation risks. It also offers limited downside risk as the maximum loss of option buyers is the option premium. Users can use it to speculate on short-term price movements or help reduce risk exposure in underlying assets