What is Binance Vanilla Options? A Beginner’s Guide to Binance Vanilla Options
– The broker you should try to trade cryptos & US stocks. Learn more!
Vanilla Options is a financial trading instrument that gives the user the right to buy or sell an asset at a predetermined price within a specified time. Binance Vanilla Options (Buy and Sell European Vanilla Options) is an options trading feature with BTC/USDT assets of Binance. The article below explains what Binance Vanilla Options is, some notes, and a first step guide for beginners to learn about Binance Vanilla Options.
What is Binance Vanilla Options?
Binance Vanilla Options is Binance’s BTC/USDT price trading feature that allows users to trade European-style options contracts. Accordingly, users profit by predicting the price of BTC/USDT up or down within a certain period.
To trade Binance Vanilla Options, users need to open an account and use USDT as the trading currency. To change, users need to transfer USDT from Spot account to Vanilla Options account. And then, users can transfer USDT from the Vanilla account to the Spot account.
Some must-know terms for Binance Vanilla users
- CALL: Call option, get profit when BTC price increases.
- PUT: Put option, take profit when BTC price drops.
- Premium: The amount paid to buy the option contract (option premium).
- Strike Price: The purchase price of the option contract (strike price).
- Close Price: Settlement price of the option.
- Expiry Date: The time the contract expires.
- Breakeven Price: The user breakeven price.
How does Vanilla Options work?
In Binance Vanilla Options, users can buy or sell options directly, and the profit generated from the price difference, the obligation to exercise the option, has been transferred so the options can be exercised or not. It is not essential.
- The user buys an option (Buy-to-open) at a low price and then sells it (Sell-to-close) at a higher price.
- The user sells an option (Sell-to-open) at a high price and buys it (Buy-to-close) at a low price.
When participating in Binance Vanilla Options trading, users act as direct buyers or sellers when buying or issuing options. Accordingly, the buyer exercises the option on T+1 day. The seller must freeze the cryptocurrency in the meantime to ensure that the buyer does not have problems executing the transaction.
Upon purchase, the option buyer must pay the option premium. Therefore, their maximum loss is the premium on the option, and the profit is the difference between the price of the underlying asset and the strike price. Meanwhile, the seller has to use collateral as collateral for the option, so the loss is unlimited, and the profit comes from the cost of buying the option.
Example of Binance Vanilla Option:
BTC/USDT is currently priced at ̀50,000 USD, and vanilla contract holders have the right to sell or buy BTC/USDT at 50,000 USD in the future. You buy this option contract, there are two situations that happen:
- If the price of BTC/USDT rises, you have the right to buy BTC/USDT for $50,000 at contract expiration. The more BTC/USDT goes up, the more profit you get.
- If the price of BTC/USDT falls, you have the right to sell BTC/USDT at $50,000 at expiration. That is, you hold a Call for $50,000, if you exercise the Call, you lose money. Instead, you give up the option and the seller pays the difference to you to exercise the option. You make a profit from the difference the seller pays you.
Open a Binance Vanilla account
To open a Binance Vanilla account, log into your Binance account. If you do not have a Binance account, register at the link below:
* See more: The complete guide Binance from a to z
On the Derivatives tab, select Vanilla Options.
On the Vanilla Options page, select Open Now. The account is successfully opened.
Binance Vanilla Options is a risky form of trading. Therefore, users need to determine whether the loss is within their control limits in advance. In the following article, we will continue to learn how to execute trades in Binance vanilla and manage these transactions.
Read more: Binance