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A trading pair, for example bitcoin and dollars, will usually be written like so:
Where BTC stands for bitcoin, and USD stands for United States dollars.
In this example of BTCUSD, which of the following statements is true?CorrectIncorrect
The cryptocurrency options on Deribit use the base currency (for example bitcoin) as collateral. Any profit/loss payments are therefore made in bitcoin.
Imagine you buy a bitcoin call option on Deribit, with a strike price of $8,000, and a premium of 0.05 BTC. If the price of bitcoin is $10,000 when the option expires, what is your profit or loss in bitcoin?
(Hint: The formulas in lecture 4.2 will help.)CorrectIncorrect
You buy another bitcoin call option on Deribit, with a strike price of $14,000, and a premium of 0.15 BTC. If the price of bitcoin is $16,000 when the option expires, what is your profit or loss in bitcoin?CorrectIncorrect
Suppose you sell a bitcoin call option on Deribit, with a strike price price of $18,000, and a premium of 0.1 BTC. If the price of bitcoin is $24,000 when the option expires, what is your profit or loss in bitcoin?CorrectIncorrect
Using the same option as in the previous question, calculate the breakeven point. The strike price is $18,000 and the premium is 0.1 BTC. Remember you’re trying to calculate the point at which the call option position will have made precisely zero bitcoin in profit for both the buyer and seller.
(Hint: The formula in lecture 4.3 will help.)CorrectIncorrect
When measured in dollars, the maximum profit of the buyer of a bitcoin call option is unlimited. Similarly, when measured in dollars, the maximum loss of the seller of a bitcoin call option is unlimited.
When measured in bitcoin though, what is the maximum profit for the buyer, and maximum loss for the seller limited to?CorrectIncorrect