Common Types of DeFi Options

Options are a type of derivative form of securities used by traders to hedge or speculate against price volatility. As the crypto market is unregulated and highly regulated, options are a good alternative for those looking to experience price swings of the crypto market, yet want to make exceptional profits. Please remember that this article aims to familiarize you with the world of “DeFi options”. So, never invest more than you can afford to lose. DeFi Options: CSPs and CCs Vaults for Cash-Secured-Puts (CSPs) and Covered-Calls (CCs) are the most prevalent sort of DeFi Options. Vaults offer CSPs and CCs against investors’ staked assets at a “secure” strike price, then distribute the premium created by the options as APY to investors. When an investor sells the right to acquire an asset at a striking price, it is known as a CC. For instance: For $14.81 per ETH, you can sell the right to buy your ETH for $3200 on Friday. If the price of ETH is greater than $3200 on Friday, you sell the ETH and keep the premium. You keep your ETH and the premium if it’s less than $3200. A CSP is the polar opposite of a CSP. Investors are compensated for agreeing to buy an asset at a specific price. For instance: For every $2900 invested in ETH, you can earn $33. If the price is $2900 on Friday, you buy ETH at that price and keep the premium. If it’s more than $2900, you keep the premium and your $2900. Settlement in DeFi options Almost all DeFi o...