World-renowned crypto exchange Binance has brought a new twist to option contracts and trading. Users can now dictate the rules of their options contracts and also very several terms. Options contracts, which are contracts that buy or sell an asset at a particular price and date. The announcement was recently made by Binance.
Trading Made Simpler
The options are dubbed “European-Style Vanilla Bitcoin Options” and are available starting from today. They are called vanilla options because they are more common than other contracts, like the American type. These contracts are also simpler to understand and execute than other types of contracts.
Traders buy Bitcoin at a set price then wait till the contract is over. As soon as it is over, the BTC held is used to buy other cryptocurrencies. This new set of contracts allow users to roll out their contracts, on their terms. This is the first time traders will be able to take control of their options this way.
Binance says that these changes will help traders execute their trades more easily. The leading exchange also assures traders that these European-styled contacts are less volatile. This means that traders can sell off their Bitcoin once it hits a given price. However, this is only valid for a particular time frame. Payment is also made in Tether’s stable coin, USDT so that cash out is not affected by price changes in the crypto.
Are There Downsides to these European-style contracts?
While being easier and less volatile, this new contract style also has its downsides. Firstly, the contracts come with more leverage. This implies that as profitable as these options contracts could be, they also present more risk and more loss for the trader.
Also, greedy traders might fall very hard with this kind of contract. The reason brings that these contracts have an unlimited size: their size is purely at the trader’s discretion.
This could lead to traders biting more than they can chew and massive losses. Nevertheless, With the right discipline and information, these contracts could give out a decent profit in the end.