Bitcoin options are financial derivatives contracts that give the holder the right, but not the obligation, to buy or sell bitcoin at a predetermined price and time. These contracts are considered a tool for managing risk and hedging exposure to bitcoin price volatility. Bitcoin options contracts have become increasingly popular in recent years as more investors seek to participate in the cryptocurrency market.
When do bitcoin options expire in April?
Bitcoin options are typically structured to expire on the last Friday of the month. In April 2021, the last Friday falls on the 30th, which means that bitcoin options contracts that expire in April will expire on April 30th. This expiration date applies to both call and put options, which are the two main types of bitcoin options contracts.
Call options give the holder the right to buy bitcoin at a predetermined price, known as the strike price. A call option is considered “in the money” if the current bitcoin price is higher than the strike price, in which case the holder can exercise the option and buy bitcoin at a lower price than the market price. If the bitcoin price is below the strike price, the call option is considered “out of the money” and will expire worthless.
Put options, on the other hand, give the holder the right to sell bitcoin at a predetermined price. A put option is considered “in the money” if the current bitcoin price is lower than the strike price, in which case the holder can exercise the option and sell bitcoin at a higher price than the market price. If the bitcoin price is above the strike price, the put option is considered “out of the money” and will expire worthless.
Why do bitcoin options expire?
Bitcoin options contracts have a finite lifespan because they are based on a specific expiration date. This date is set at the time the contract is created and cannot be changed. The reason for this expiration date is to limit the risk exposure of both the buyer and the seller of the contract. An options contract that has no expiration date would allow the holder to exercise the option at any time, which would make it difficult for the seller to manage their risk exposure.
By setting an expiration date, both parties know when the contract will end, and they can plan accordingly. For example, a buyer of a call option may choose to exercise the option if the bitcoin price rises above the strike price, but only if the expiration date is far enough in the future to give the price time to rise. Similarly, a seller of a put option may be more willing to sell at a lower price if the expiration date is far enough in the future to allow the market to recover.
Conclusion
Bitcoin options contracts are a popular tool for managing risk and hedging exposure to bitcoin price volatility. These contracts have a specific expiration date that is set at the time the contract is created. Bitcoin options contracts that expire in April 2021 will expire on the last Friday of the month, which is April 30th. Understanding the expiration date is essential for both buyers and sellers of bitcoin options contracts, as it allows them to plan and manage their risk exposure.