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Binance Vanilla Options: what it is and how it works

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 Binance’s BTC/USDT assets. The following article 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. As a result, users profit by predicting the price of BTC/USDT up or down within a certain period.

To trade Binance Vanilla Options, users must open an account and use USDT as their trading currency. To change, users need to transfer USDT from spot account to Vanilla Options account. And then, users can transfer USDT from Vanilla account to Spot account.

Some Terms to Know for Binance Vanilla Users

  • CALL: Call Option, you get profit when the price of BTC rises.
  • PUT: Put option, take profit when the price of BTC drops.
  • Premium: the amount paid to purchase the option contract (option premium).
  • Strike Price: The purchase price of the strike price.
  • Closing price: Option settlement price.
  • Expiration date: The expiration time of the contract.
  • Break-even price: The user’s break-even price.

How does Vanilla Options work?

In Binance Vanilla Options, users can buy or sell options directly and the profit generated by the price difference, the obligation to exercise the option, has been transferred so that 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 the trading of Binance Vanilla Options, users act as direct buyers or sellers when buying or issuing options. As a result, the buyer exercises the option on day T + 1. The seller must freeze the cryptocurrency in the meantime to ensure that the buyer has no problems in executing the transaction.

At the time of purchase, the buyer of the option must pay the premium of the option. Thus, 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 must use the guarantee as collateral for the option, so the loss is unlimited, and the profit comes from the cost of purchasing 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 when the contract expires. The more BTC/USDT goes up, the more profit you get.
  • If the price of BTC/USDT drops, you have the right to sell BTC/USDT at $50,000 at expiration. That is, you keep a call for $ 50,000, if you exercise the call, you lose money. Instead, you give up the option and the seller pays you the difference to exercise the option. You earn a profit from the difference that the seller pays you.

Open a Binance Vanilla account

To open a Binance Vanilla account, log in to your Binance account. If you do not have a Binance account, please register at the link below:

On the Vanilla Options page, select Open Now. The account has been opened successfully.

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