For centuries, futures have served as a well-established instrument, facilitating trade in various valuable commodities and stocks, including gold, silver, and oil. However, with the rise of the crypto industry, new and innovative trading opportunities, connected with the crypto futures market, have emerged.
In this article, we will discuss the difference between futures and options, mentioning their pros and cons for you to understand which of them shits you best. Also, we will recommend a reliable platform that allows for the perpetual trading crypto.
Difference Between Futures and Options
Futures and options trading are methods used in the crypto market. Even though they have some similarities, they also have unique differences:
Definition:
- Futures involves buying or selling contracted agreements that require participants to purchase or give particular assets at fixed dates and rates.
- Options allow traders to acquire or sell cryptos at predetermined prices within specified timeframes, but it is not an obligation.
Obligation:
- When participating in the crypto futures market, both parties are obligated to follow the terms of the agreement. The buyer must purchase the coin and the seller must sell it at the value and day said in the agreement.
- When buying options, you can decide on whether to follow through with it or not, but the seller doesn’t have that same choice and must follow through with the terms of the agreement if you decide to proceed.
Risk:
- Futures carries a higher risk as both the buyer and seller must complete deals when the agreement expires, regardless of what’s going on in the market.
- Options provide the buyer with more control and lower risk. They may choose to perform the contract depending on how the price behaves. In contrast, the seller has the possibility of facing high risk if the buyer decides to execute the agreement.
Potential:
- The crypto futures market allows traders to make profits not depending on whether the market’s rate is increasing or decreasing. If traders believe prices will rise, they can take long positions, or if they predict a decline, they can take short positions.
- Options trading can lead to substantial profits by taking advantage of price movements. However, buyers can only make a profit up to the discrepancy between the market price and the strike price, while sellers receive the premium but have a limited potential profit.
Liquidity:
- Futures can be easier to get into or out of due to higher liquidity in the markets.
- When trading options, it’s crucial to note that the markets for less popular cryptos may obtain lower liquidity than futures. This can lead to wider bid-ask spreads and make it more difficult to execute trades.
Both trading options offer unique opportunities and risks. It is recommended that you conduct extensive research and educate yourself to gain a comprehensive understanding of the complexities of each approach. To practice both these methods, welcome to the WhiteBIT exchange. It offers futures with no end date, low fees, and quality support service. In addition, by reading the blog of the platform, you can receive priceless knowledge about trading with a profit.
