What Is (Option) Rights? A Detailed Guide From A to Z for Traders

What Is an Option? The Basic Concept You Need to Know

Simply put, an (option) is a derivative contract that gives you the right (but not the obligation) to buy or sell an underlying asset at a predetermined price within a certain period.

Unlike directly owning the asset, options are flexible trading tools that allow traders to:

• Participate in price movements of the asset without buying/selling it
• Profit even when the market goes down
• Manage risks more effectively

For example: Bitcoin is currently priced at $28,000. You forecast BTC will rise to $30,000 in the next month. Instead of buying directly, you can buy a call option (call option) at the $28,000 level. If BTC actually rises to $32,000, you will make a significant profit. But if BTC drops to $20,000, you only lose the initial premium fee without additional losses.

Advantages of Option Trading That Traders Should Know

1. Profit in All Market Conditions

Unlike traditional trading (mua thấp, bán cao), with options you can:

• Profit when prices rise (mua call option)
• Profit when prices fall (mua put option)
• Even profit during strong market volatility

2. Capital Protection & Better Risk Management

Risks are predefined — you can only lose the premium (premium) paid. This acts as a “insurance” layer for your trading position.

3. Financial Leverage Power

With a small capital, you can control a much larger amount of assets. For example: with just $1,000, you can buy options equivalent to $100,000 worth of Bitcoin.

4. Diverse & Flexible Strategies

There are dozens of combinations of call/put options to create strategies tailored to specific market forecasts.

Call Option vs Put Option: The Basic Difference

Call Option (Right to Buy)

• Buyer: Pays a fee, has the right to buy the asset at a set price, maximum loss = paid fee, unlimited profit
• Seller: Receives fee, has the obligation to sell if required, maximum profit = fee received, unlimited loss
• Use When: You forecast the price will increase

Put Option (Right to Sell)

• Buyer: Pays a fee, has the right to sell the asset at a set price, maximum loss = paid fee, unlimited profit
• Seller: Receives fee, has the obligation to buy if required, maximum profit = fee received, unlimited loss
• Use When: You forecast the price will decrease

Main Components of an Option Contract

Strike Price (Exercise Price): The price at which you have the right to buy/sell the asset. This price remains fixed throughout the contract duration.

Expiration Date (Expiration Date): The period during which you can exercise the option. After this date, the option expires.

Premium (Insurance Fee): The amount you pay to buy the option. This is the cost to have the trading right, and if you do not exercise, this money is lost.

Contract Size (Contract Volume): The quantity of the underlying asset specified for each contract.

ITM, ATM, OTM - The Three States of an Option

This classification helps you understand whether the option has profit potential:

In The Money (ITM): The option is profitable now

• Call ITM: Strike price < current market price
• Put ITM: Strike price > current market price

At The Money (ATM): The option is at breakeven (after deducting fees)

• Strike price ≈ current market price (difference equals the premium)

Out Of The Money (OTM): The option has no intrinsic value, only time value remains

• Call OTM: Strike price > current market price
• Put OTM: Strike price < current market price

Common Option Trading Strategies

Covered Call Strategy

You own the asset and sell a call option on it. Purpose: generate additional income from premiums, but ready to sell if the price rises sharply.

Long Put Strategy

Buy a put option when you forecast a price decline. If the price drops significantly, your gains can multiply your initial capital. Disadvantage: cost is the premium, if the price doesn’t fall as expected, you lose the entire premium.

Married Put Strategy

Own the asset and buy a put option. This acts as “insurance” — if the price drops, the put offsets losses, but you can still profit if the price rises.

Disadvantages of Options That You Should Not Ignore

High Complexity

Options involve many technical terms, complex rules, and require a thorough understanding of how they work. This makes them unsuitable for complete beginners.

Expensive Margin Requirements

Margin requirements to open positions can be very high, and trading costs are often higher than futures or regular stocks.

Unlimited Losses for Sellers

If you are the seller, your losses can be unlimited. You are forced to buy/sell the asset at a set price regardless of unfavorable market movements.

Margin Call Risks

If your account lacks sufficient funds to maintain the position, your broker may issue a margin call and force liquidation at an unfavorable price.

Real-World Example: FTX Collapse

The collapse of the FTX exchange and Alameda fund in 2022 is clear evidence — Alameda held huge margin positions on FTX (billions of USD), and when the market moved, the entire system collapsed, causing thousands to lose their money.

Option vs Futures: What’s the Difference?

At first glance, options and futures seem similar, but the main differences are:

• Options: Give you the right, not the obligation, to buy/sell. Maximum loss limited to the premium paid.
• Futures: Oblige you to buy/sell at expiration. Losses can be unlimited.

Are Options Legal in Vietnam?

In Vietnam, options trading does not yet have specific regulations. However, according to Decree 158/2020/ND-CP on derivatives, options are permitted for OTC (over-the-counter) trading, mainly for large institutional investors.

The first official derivative product on the Vietnamese exchange is VN30 Futures Contract. According to HNX statistics, as of November 2022:

• Number of derivative trading accounts: over 1.15 million
• Average trading volume of VN30 Futures: from 10,954 contracts/session (2017) to nearly 250,000 contracts/session (2022)

In the future, Vietnam’s stock market is expected to expand with more derivative products such as stock and index options.

Things to Remember Before Starting Option Trading

1. Learn Thoroughly: Options are complex tools. Take time to truly understand how they work before investing money.

2. Start Small: When beginning, avoid large bets. Gradually increase size as you gain experience.

3. Focus on One Asset: In the early stages, only trade options on assets you understand well (e.g., Bitcoin, Ethereum).

4. Have a Clear Strategy: Before each trade, define:

   • Your profit target
   • Stop loss point (stop loss)
   • Reasonable trading capital

5. Strict Risk Management: Set limits on the amount you are willing to lose per trade.

Conclusion

Options are powerful trading tools but also come with challenges. They open opportunities for profit in all market conditions but require deep knowledge and disciplined trading.

If you are willing to learn, practice patiently, and follow a clear strategy, options can become a valuable part of your investment portfolio. But if you are still unsure, start with simpler derivatives or traditional spot trading.

Most importantly: Never trade with money you cannot afford to lose.