Crypto options explained: calls, puts and bitcoin options

Key points

An option gives its owner the right, but not the obligation, to buy (a call) or sell (a put) an asset at a fixed strike price by a set date.

The buyer pays a premium upfront. If the option expires out of the money, the SEC says the whole premium is lost. Sellers can face unlimited losses with some contracts.

In the US, the SEC approved options on certain spot bitcoin ETPs in July 2025, and options on two Cboe bitcoin ETF indexes in September 2025.

In the UK, firms have been barred since January 2021 from selling crypto derivatives, including options, to retail consumers.

Options let traders bet on a price move, or protect against one, for a fixed upfront cost. In crypto, they range from options on bitcoin funds listed on US exchanges to products on offshore derivatives platforms.

This guide explains how options work, using the SEC’s own examples, the main risks, and where regulated bitcoin options trade. For futures, see bitcoin futures explained.

What an option is

The SEC defines options as contracts giving the owner the right to buy or sell an underlying asset, at a fixed price, on or before a specified future date. They’re derivatives: their value comes from the underlying asset, which can be a stock, an index, an exchange-traded fund or another product.

The key terms:

Term	Meaning
Call	The right to buy at the strike price
Put	The right to sell at the strike price
Strike price	The fixed price at which you can buy or sell
Expiration date	The date the contract ends
Premium	The price you pay for the option, upfront and non-refundable
Holder and writer	The buyer and the seller of the option
Exercise	Using your right to buy or sell
Assignment	The notice telling the writer to fulfill the obligation

An option is in the money when exercising it would be worthwhile: a call when the strike is below the market price, a put when the strike is above it. It’s out of the money in the opposite case, and at the money when the two prices match.

What sets the premium

The SEC lists three main factors:

the underlying asset’s price compared with the strike price;
the time until the option expires;
the volatility of the underlying asset’s price.

The SEC and the CFTC both describe bitcoin as highly volatile, so this third factor is especially relevant to crypto options.

A call, step by step

The SEC’s bulletin uses a stock option, but the logic is the same for options on a bitcoin fund. For listed stock options, a contract generally represents 100 shares.

The shares trade at $68. You expect a rise and buy a $70 call for a premium of $2.20 a share: $220 per contract.
To break even, the price must rise above $70 plus the premium: $72.20.
Two weeks later the shares are at $80 and the option’s premium has risen to $10.20. Selling it brings $1,020, a gain of $800 before costs.
But if you wait and the price falls to $65 at expiry, the option expires worthless and you lose the $220.

A put, step by step

The shares trade at $72. You expect a fall and buy a $70 put for $2.20 a share: $220 per contract.
To break even, the price must fall to $67.80.
If it drops to $60, the premium may rise to $10.20, and selling the option brings an $800 gain before costs.
If instead the price rises to $75 at expiry, the put expires worthless.

If you already hold the asset, a put gains value as the price falls, which can offset part of the loss on your holding.

The risks

The SEC warns that with options, it’s possible to lose all of your initial investment, and sometimes more:

Buyers risk the entire premium. If the option expires out of the money, it’s all lost.
Writers may carry even higher risk: certain contracts can expose them to unlimited potential losses.
Volatility near expiry can push an option to expire worthless.
Anything that affects the underlying asset affects the option.

Options compared with futures

	Buying an option	A futures position
Obligation	A right, not an obligation	An obligation to buy or sell, unless you close the position
Upfront cost	The premium, paid to the seller	Margin, a performance bond
Daily settlement	None for the buyer once the premium is paid	Marked to market every day; you may have to add margin
Most a buyer can lose	The premium	More than the initial margin, if prices move far enough

For the seller of an option, the picture is different: the obligation sits with them, and the SEC warns some contracts expose writers to unlimited losses.

Where regulated bitcoin options trade

United States. The CFTC’s 2018 backgrounder records that LedgerX, registered as a swap execution facility in July 2017, had its bitcoin options certified on 19 September 2017. Since then, the SEC has approved options linked to bitcoin funds:

on 29 July 2025, options on certain spot bitcoin ETPs, FLEX options on shares of certain bitcoin-based ETPs, and position limits of up to 250,000 contracts for listed options on certain bitcoin ETPs;
on 17 September 2025, options on the Cboe Bitcoin U.S. ETF Index and the Mini-Cboe Bitcoin U.S. ETF Index.

See crypto ETFs beyond bitcoin.

United Kingdom. Since 6 January 2021, the FCA has barred firms from selling crypto derivatives, including options, futures and CFDs, to retail consumers. See crypto leverage and derivatives rules.

Offshore platforms. Many crypto derivatives platforms operate outside these frameworks. Before using any platform that offers options, check that it’s registered where you live. See how to check a trading platform with the CFTC and NFA.

Before you trade options

Learn the terms first. For more detail, the SEC points to the publication Characteristics and Risks of Standardized Options.
Start with what you can lose. As a buyer, assume the premium could go to zero.
Avoid writing options unless you fully understand the obligation you’re taking on.
Check the expiry date. An option’s value is directly tied to it.
Remember the tax. Gains and losses on options generally have tax consequences. See crypto tax in the US.

Frequently asked questions

What is a crypto call option?

A contract giving the buyer the right, but not the obligation, to buy the underlying asset at the strike price on or before the expiration date. The seller must sell at that price if the buyer exercises.

What is a put option?

A contract giving the buyer the right to sell the underlying asset at the strike price on or before the expiration date. The seller must buy at that price if the buyer exercises. Investors often buy puts when they expect a price to fall.

How much can I lose buying an option?

As a buyer, you risk the entire premium you paid. If the option expires out of the money, the SEC says the whole premium is lost. Sellers, or writers, can face much larger losses, unlimited with some contracts.

What sets the price of an option?

The SEC lists three main factors: the underlying asset's price compared with the strike price, the time until expiry, and the volatility of the underlying asset's price.

Can UK investors trade crypto options?

Not as retail consumers through UK firms. Since 6 January 2021, the FCA has barred firms from selling crypto derivatives, including options, futures and CFDs, to retail consumers.

Crypto options explained: calls, puts, premiums and where regulated bitcoin options trade