Options are financial derivatives contracts that give holders the right but not the obligation to buy or sell a predetermined amount of an asset at a specified price, and at a specific date in the future.
In the case of Bitcoin options, the underlying asset is the cryptocurrency Bitcoin (BTC). While the cryptocurrency options market is still fairly new, you can already trade Bitcoin and Ethereum options on a handful of traditional securities exchanges and crypto trading platforms.
Traders who wish to gain exposure to Bitcoin now have additional choices. The 11 recently launched spot Bitcoin exchange-traded funds (ETFs), which were approved by the U.S. Securities and Exchange Commission in January 2024, each offer a basket of cryptocurrency securities and can be traded on Cboe BZX, NYSE Arca, and Nasdaq.1
From a technical point of view, cryptocurrency options and options contracts on assets like stocks, indexes, or commodities function in essentially the same way. However, crypto options are generally less liquid than options on leading stock indexes or commodities like gold. That’s a result of the crypto markets still being a lot smaller than traditional investment markets.