Beginner's Guide to Crypto Futures, Crypto Options, and Infinite Contracts
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Purpose of Cryptocurrency Futures Trading
Cryptocurrency futures are contracts between two parties that buy and sell a certain amount of underlying cryptocurrency at a certain future price on a specific date and time.
You can be exposed to a wide range of cryptocurrencies without owning them.
Individuals and organizations that own cryptocurrencies can use futures to hedge their exposure to market movements.
As the cryptocurrency market continues to grow, various products that can be used within the cryptocurrency space are also growing.
The detailed guide covers the basics of cryptographic derivatives types, trading options, trading tips, and pros and cons.
Types of Cryptocurrency Derivatives
an indefinite contract
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Futures include contracts between buyers and sellers that decide to sell assets in the future. Specific dates and amounts are also discussed in advance. Contract details may vary, but terms are generally similar.
Gifts are a popular type of cryptographic derivative commonly used by institutional customers. Data from futures are typically used to predict future price movements and market sentiment.
Users may gain or lose profits depending on future price changes. For example, if the current price of Bitcoin is $40,000, users can buy or sell futures contracts in anticipation of a price drop or rise.
In any case, if a buyer purchases a futures contract worth 1 Bitcoin ($40,000), and the futures contract increases to $60,000 by the end of the contract, the buyer will realize a profit of $20,000. Conversely, if the price falls to $30,000 at the end of the contract, the buyer will lose $10,000.
More specifically, Bitcoin futures are contracts between buyers and sellers who decide to buy and sell Bitcoin at a given price on a specific date in the future. Contracts are usually settled in USD or other currency agreed by both parties.
Options are another type of derivative agreement that allows users to buy or sell certain goods at a fixed price on a future date. Unlike futures, however, options provide an opportunity for buyers not to buy assets if they want to.
There are many different types of options, including call and put options, U.S. and European options. The call option allows users to purchase assets on a specified date, and the put option allows users to sell assets on a specified date. In addition, U.S. options can be sold before the expiration date of the contract, while European options must be sold at exactly the agreed date.
The user must pay a fee to purchase the contract. For example, if the option price is $800, the user will have to pay for it in addition to the actual price of the asset they want to purchase.
Regardless of the outcome of the transaction, the user must pay a fee of $800. So it's worth noting that options are not a completely risk-free way to trade cryptocurrency derivatives.
Let's look at the following example. Let's say you entered a call option for Bitcoin for $50,000. However, the price dropped to $40,000 on the agreed date. You don't have to take a $10,000 loss from the option. You may exercise your right not to perform the contract.
However, the $800 fee paid to purchase the contract will not be refunded. In this case, the total loss is $800.
Permanent contracts, also known as permanent futures contracts or permanent swaps, are the most common types of cryptographic derivatives, especially among daily users. In traditional finance, an indefinite contract is a difference contract (CFD).
The main difference between indefinite contracts and futures and options is that indefinite contracts do not have expiration dates. Paying a holding fee called the funding ratio allows users to maintain as many positions as they want. The account must also include a minimum amount called margin.
Underlying assets typically change in price, which generally means that there is a large difference between the index price and the indefinite futures contract price. For example, if the price of an indefinite contract is higher than the index, those who choose "Long" typically pay a funding rate to cover the price difference.
Similarly, those who choose to "sell" will pay a fund rate to cover the price difference if the indefinite futures contract price is below the index price.
Crypto derivatives trading is a great option for both novice crypto users and experienced users. Depending on the level of risk you feel safe about, you can choose from a variety of options.
Cryptocurrency Has High Market Risks And Volatility Despite Its High Growth Potential. It is strongly recommended that users investigate and invest at their own risk. BitMart will do its best to list only high-quality coins, but will not be responsible for any investment losses.