The Difference Between Binance Options and Contracts

The main difference between Binance options and contracts is: Type: Options give the buyer the right to buy and sell, while the contract stipulates the obligation to buy and sell. Settlement: Options are settled on the expiration date, and contracts are settled before the expiration date. Leverage: Options have higher leverage and contracts have lower leverage. Risk: The option risk is limited to the option premium, the contract risk is greater, and the entire margin may be lost. Usage: Options are used for hedging or speculation, and contracts are used for leveraged trading or hedging.

The difference between Binance Options and Contracts

Binance Options and Contracts are two different cryptocurrency derivatives offered by the Binance exchange. They have the following key differences:

1. Types

• Options: An option gives the buyer the right, but not the obligation, to buy or sell an asset (called the underlying asset) at a specific price on a specific date.
• Contract: A contract is an agreement between a buyer and a seller to buy or sell a certain amount of an underlying asset at a specific price in the future.

2. Settlement

• Options: Options are settled on the expiration date, and the buyer decides whether to exercise the option at the strike price. If exercised, the buyer must buy or sell the underlying asset at the exercise price. If not exercised, the option expires and becomes void.
• Contract: The contract is settled before the expiry date. On the maturity date, the difference between the spot price and the contract price of the underlying asset is settled in cash.

3. Leverage

• Options: Options have higher leverage because the buyer only has to pay the option premium to receive the potential gain.
• Contracts: Contracts offer lower leverage as the buyer must deposit a certain amount of margin up front.

4. Risk

• Options: The risk of options is limited to the option premium. If the price of the underlying asset moves in an adverse direction, the buyer will lose at most the option premium.
• Contracts: Contracts are riskier because the buyer may lose the entire deposit if the price of the underlying asset moves in an adverse direction.

5. Uses

• Options: Options are used to hedge risk, speculate, or create complex trading strategies.
• Contracts: Contracts are mainly used for leverage trading or hedging.

Which one to choose?

Choosing options or contracts depends on personal trading strategy and risk tolerance. Options may be a better choice for traders with a lower risk tolerance who are looking for a small limit on potential gains. Contracts may be a better option for traders looking for higher leverage and willing to take on greater risk.

The above is the detailed content of The Difference Between Binance Options and Contracts. For more information, please follow other related articles on the PHP Chinese website!