Call Option

A call option is a financial contract that gives the holder the right, but not the obligation, to buy a specific amount of an underlying asset at a predetermined price (the strike price) within a specified timeframe. In the context of cryptocurrencies, a call option allows the holder to buy a certain amount of a cryptocurrency at a predetermined price, known as the strike price, before a specified expiration date.

Example:

Let's say you purchase a call option for Bitcoin with a strike price of $50,000 and an expiration date one month from now. If, at the expiration date, the price of Bitcoin is above $50,000, you can exercise your option to buy Bitcoin at the lower price of $50,000, regardless of the current market price. If the price of Bitcoin is below $50,000 at expiration, you can let the option expire worthless, and you would only lose the premium you paid for the option.

Case:

Suppose you buy a call option for Ethereum with a strike price of $4,000 and an expiration date in three months. If the price of Ethereum surges to $5,000 before the expiration date, you can exercise your option to buy Ethereum at $4,000, even though the market price is higher. This allows you to profit from the price difference between the strike price and the market price.