Learn in Detail About (Options) Trading – From Basic to Advanced

What Are (Options)?

A call option contract gives the holder the right to buy or sell a specific asset at a fixed price, but not the obligation to do so. It is a popular derivative instrument in global financial markets, helping investors increase profit opportunities.

Options are built on underlying assets such as cryptocurrencies (Bitcoin, Ethereum), stock indices, or ETFs. Instead of purchasing the asset directly, traders can speculate on its price at a specific future time.

###Real-Life Example

Suppose Bitcoin is at $28,000. You predict the price will rise and buy a call option (call option) with a strike price of $28,000. However, when the contract expires, BTC’s price drops to $20,000. In this case, you are not obliged to buy – but the premium paid will be non-refundable.

###Difference Between Options and Futures

The main point is the right to choose. With options, you have the right but not the obligation. Conversely, futures require you to execute the trade at expiration, regardless of the current price.

Key Features of Options

1. Exposure to Assets Without Ownership

Options are derivative tools that allow you to participate indirectly in the cryptocurrency market without buying, storing, or managing the actual assets.

2. Leverage Power

With a small capital, you can control a large position. For example: with $1,000 and 1:100 leverage, you can trade Bitcoin worth $100,000.

3. Profit from Falling Markets

Unlike traditional trading (buy low, sell high), options enable you to profit even when asset prices decline through put options.

Components of an Options Contract

Expiration Date (Expiration Date)

This is the date the contract expires. For example: if you open a call option predicting Bitcoin will reach $30,000 by 04/30/2025, that is the expiration date.

Strike Price (Strike Price)

A fixed price specified in the contract. This price remains unchanged during the contract’s validity. In the above example, the strike price is $30,000.

Premium (Premium)

This is the fee you pay to have the right to execute the contract. If you do not exercise the option, this fee is lost.

Contract Size

Refers to the quantity of assets that can be traded in one options contract. This quantity is fixed in advance.

Call Options and Put Options – The Two Main Types

Call Options (Call Option)

Call options allow you to buy an asset at a predetermined price, but without obligation. You pay a premium for this right.

Profit and Loss:

• Maximum Loss: Equal to the premium paid
• Potential Profit: Unlimited

By Price Category:

• In The Money (ITM): Strike price lower than current market price → Contract has value
• At The Money (ATM): Strike price equals premium plus current price → Break-even point
• Out Of The Money (OTM): Strike price higher than current market price → No profit yet

Put Options (Put Option)

Put options give you the right to sell an asset at a specified price. You also pay a premium.

If Bitcoin drops to $24,000, but you hold a put option with a strike price of $27,800, you can still sell at a higher market price.

Similar Categories:

• In The Money (ITM): Strike price higher than current market price
• At The Money (ATM): Strike price higher than current price by the amount of the premium
• Out Of The Money (OTM): Strike price lower than current market price

Basic Options Trading Strategies

Covered Call

Own the asset and sell a call option to someone else. This strategy helps generate additional income when you expect the price to fluctuate below the strike.

Long Put

Buy a put option when you anticipate a price decline. If correct, profits can multiply. The downside is limited to the premium paid.

Married Put

Own the asset while purchasing a put option as insurance. If the price drops, the put offsets the loss.

Advantages of Trading Options

✅ Profit Opportunities in Bear Markets: You can profit not only when prices rise but also when they fall.

✅ Risk Insurance: Options act as a hedge, protecting your investment portfolio.

✅ Pre-Defined Risk: Maximum loss equals the premium, with no surprises.

✅ Financial Leverage: Control large positions with less capital.

✅ Multiple Strategies: Numerous ways to combine call and put options to create different strategic positions.

Disadvantages of Trading Options

❌ Complexity: Options involve many technical concepts, unsuitable for beginners.

❌ High Costs: Margin fees and transaction costs are often higher than stocks or futures contracts.

❌ Risks for Sellers: Sellers of options may face unlimited losses.

❌ Margin Calls: If you cannot maintain margin, your broker may liquidate your account.

❌ Liquidity Risks: During volatile market periods, liquidity shortages and defaults can occur on exchanges.

Legal Status of Options Trading

In Vietnam

Currently, options trading in Vietnam lacks a clear legal framework. However, it follows Decree 158/2020/ND-CP on derivatives securities.

Options can be traded OTC (Over-The-Counter) and mainly serve large institutional clients. The first derivative product on the Vietnamese stock market is the VN30 index futures contract.

Where to Trade Options?

If you want to trade options, look for international platforms licensed and regulated by global financial authorities. When choosing a platform, consider:

• ✓ Regulated and supervised by international financial authorities
• ✓ Providing analysis tools and risk management features
• ✓ Good customer support
• ✓ User-friendly trading platform supporting multiple devices
• ✓ Flexible leverage ratios

Tips for Beginners

🎯 Learn Thoroughly Before Starting: Master basic options knowledge before risking real capital.

🎯 Start Small: Begin with small amounts and increase as you gain confidence.

🎯 Focus on One Asset: Concentrate on a single asset you understand well to avoid mistakes.

🎯 Have a Strategy: Develop a trading plan and stick to it consistently.

🎯 Manage Risks: Always use stop-loss orders and never risk all your capital on a single trade.

Summary: Trading Options opens up many profit opportunities alongside traditional trading methods. However, due to its complexity and inherent risks, you should invest time in thorough learning before entering the market. The key to success is preparation, discipline, and effective risk management.