Trading Fees and How to Open an Order Binance Vanilla Options (European Options Contract)
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Binance Vanilla Options is a European-style options contract that users can only exercise on the expiration date. Vanilla Options allows a user to buy a Buy option or a Put option as a buyer or issue a Call or Put option contract as a seller. The following article learns about trading fees and how to trade and execute Vanilla Options on Binance.
What is the Vanilla Options Contract Code?
What does contract code mean? Contract codes typically convey information about the underlying asset quote and expiration date.
Example: Code BTC-211231-32000-C (Buy option), where:
- BTC is the underlying asset and Vanilla Options uses USDT for quotes and collateral
- 211231 means the expiration date is December 21, 2021,
- 32000 is the strike price. This is the buying or selling price of the option contract until the expiration date.
- The letter C (which stands for CALL) refers to a Call option contract, and the letter P (which stands for PUT) refers to a put option. If a user holds a Buy option, they expect the price to rise. Conversely, users expect the price to fall if they hold a put.
The option fee is the amount a user pays to buy an option contract. The Option Fee consists of two parts, the transaction fee, and the exercise fee. The transaction fee is charged for each successfully executed trade and calculated on the price index at the time of order completion. When the Option is exercised, the buyer makes a profit, the buyer must pay this fee. In addition, sellers are required to freeze their funds as collateral to ensure the contract can be exercised on the expiration date. The formula for calculating transaction fees is as follows:
- Trading fee = Index price x Trading fee.
- Execution fee = Exercise price x Execution fee.
- The transaction fee is not more than 10% of the total transaction amount.
- The exercise fee is not more than 10% of the total profit after exercising the Option.
- Transaction fee: 0.03% of the base value
- Performance fee: 0.1% of base value
How to trade Vanilla Options
Access the Vanilla Options feature by clicking the Derivatives tab, selecting Vanilla Options. If you don’t have a Binance account, register using the link below:
* See more: The complete guide Binance from a to z
Then click [Transfer] to transfer money from Spot account [Spot Account] to Wallet [Option Account].
Enter the [Amount] box on the Transfer window and click [Submit]. Then, select the contract code you want to trade.
In the right corner of the screen is the order. Custom [ Custom] is set based on the user’s limited order price. BBO orders refer to orders that provide the best bid that will place a user’s order by either selecting a request or a single-price bid on the order book. Enter the [Amount] box, select [BUY] or [SELL].
Orders that do not execute immediately are displayed under the [Open orders] section.
Vanilla Options on Binance allows traders to decide if they want to exercise their rights until expiration. Therefore, they profit by choosing between placing an order and executing a CALL or PUT order. Traders can buy low and sell high to profit from the spread or vice versa. If the user chooses to close all option positions before the expiration date, the user waives their right to the options contract. Users can also wait for the options contract to expire and exercise their rights.
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