What Are Options?
Options contracts offered by Gate are financial derivatives tailored for cryptocurrencies.
An option is a contract between a buyer and a seller.
After the buyer pays the seller a certain amount (known as the premium), the buyer gains the right to buy or sell a specified quantity of the underlying asset from/to the seller at a predetermined price on a specific future date.
The option buyer can choose whether to exercise the option on the expiration date, while the seller is obligated to cooperate if the buyer chooses to exercise.
What Is Simulated Trading?
Simulated trading is a feature on Gate that allows users to trade options contracts using simulated funds in a demo trading mode. The trading interface and operation methods are identical to live trading, with clear labeling as ‘Simulated Trading’.
Simulated trading does not incur any real costs; the funds used are provided by the platform solely for practice and experience.
What Does an Option Name Mean?
To simplify communication, options are usually represented by a code in the following unified format: Market-Expiration Date-Strike Price-Type
- Market: The relevant cryptocurrency market
- Expiration Date: yymmdd; for example, 250627 means June 27, 2025
- Strike Price: The pre-agreed execution price at expiration
- Type: C stands for Call Option, P stands for Put Option
For example: An option with the code BTC-250627-18500-C represents a BTC option, with an expiration date of 2025/06/27, a strike price of 18,500 USDT, and is a call option.
Common Terminology
- Underlying Asset: The cryptocurrency asset specified in the options contract
- Premium: The fee paid by the option buyer to the seller to obtain the right to exercise the option at expiration
Buying Call/Put Options: Premium = Order Price x ABS(Order Quantity) x Contract Multiplier
- Expiration Date: The last date on which the option contract can be exercised (for European options, this is the only exercise date)
- Strike Price: The specific price at which the underlying asset is bought or sold on the expiration date, as specified in the contract
- Option Type: Includes Call Options and Put Options
What Are ITM, ATM, and OTM?
In options trading, ITM / ATM / OTM describe the “moneyness” of an option—that is, the relationship between the current price of the underlying asset and the strike price.
- ATM (At The Money) – At-the-money option
- ITM (In The Money) – In-the-money option
- OTM (Out of The Money) – Out-of-the-money option
How Are Value and P&L Calculated?
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Unrealized P&L reflects the floating profit and loss of your current position based on the latest price, and changes with market fluctuations.
Formula: Unrealized P&L = (Mark Price - Entry Price) × Contract Multiplier × Quantity -
Realized P&L refers to settled amounts, including trading fees and profit/loss from manually closing positions.
Formula: Realized P&L = Fees + Closing P&L -
Expiration P&L is determined by the relationship between the strike price and market price at expiration:
At-the-money/out-of-the-money options: Not exercised, P&L = 0
In-the-money options: Automatically exercised
P&L = (Settlement Price - Strike Price) × Contract Multiplier × Quantity - Exercise Fee
Note: Expiration P&L only accounts for the position’s own profit or loss, and does not include the premium paid when purchasing the option.
All Options on Gate Are Cash-Settled
Cash-settled options mean that upon expiration or exercise, the buyer and seller do not exchange the actual underlying asset; instead, profits and losses are settled in cash based on the difference between the market price and the strike price.
When a cash-settled option contract is exercised, only the difference between the strike price and the current price is credited to the buyer’s account. Only this difference is paid in cash.
At expiration:
- Call Option:
- If Market Price > Strike Price, the buyer receives (Market Price - Strike Price) × Contract Multiplier in cash.
- If Market Price ≤ Strike Price, the option expires worthless and the buyer loses the premium.
- Put Option:
- If Market Price < Strike Price, the buyer receives (Strike Price - Market Price) × Contract Multiplier in cash.
- If Market Price ≥ Strike Price, the option expires worthless and the buyer loses the premium.
What Is Initial Margin?
Initial margin is the minimum amount required to open a position.
Initial margin (opening margin) is the minimum margin a user must pay when opening a seller’s position in an options contract. It covers potential risk exposure and is dynamically calculated based on the underlying price, the degree of out-of-the-money (OTM), and the margin rate set by the system.
Used to calculate the margin to be frozen when opening a position:
IM = [max(Margin Rate₁ × Underlying Price, Margin Rate₂ × Underlying Price − OTM Amount) + Option Price] × Contract Multiplier
Example:
Selling a BTC call option, underlying price $115,000, strike price $116,000, option price $200
Initial margin ≈ (max(0.1×115,000, 0.15×115,000−1,000) + 200) × 0.01 = $164.5
What Is Maintenance Margin?
Maintenance margin is the minimum amount required to keep your current position open.
Maintenance margin is the minimum margin level your account must maintain during the holding period to prevent excessive risk from market fluctuations. If your account margin falls below the maintenance margin requirement, the system will trigger forced liquidation (auto-close) to limit further losses.
Minimum margin required during holding: MM = (Maintenance Margin Rate × Underlying Price + Option Price) × Contract Multiplier
Example: Maintenance margin ≈ (0.075×115,000 + 200) × 0.01 = $88.25
What Is Settlement Price?
Settlement price is generated by floating a certain percentage above and below the mark price, resulting in the highest and lowest settlement prices. The price floating above the mark price is the highest settlement price, and the price floating below is the lowest settlement price. The floating percentages vary for different options contracts.
Settlement price serves two purposes:
- To calculate position value and determine if equity is negative;
- When reducing a user’s position due to insufficient market liquidity, the settlement price is used to take over part of the user’s position.
What Is Forced Liquidation?
In Classic Accounts:
The system continuously monitors account risk rates and equity. If equity at the settlement price is negative, the account will be immediately taken over.
If risk rate ≥100% and exceeds the margin call period:
- The system will first cancel the open orders occupying the highest margin, prioritizing risk reduction.
- If this is still insufficient, the system will automatically reduce short positions; if the market cannot absorb them, the system will take over the corresponding positions at the settlement price.
During order cancellation or position reduction, if equity at the settlement price becomes negative, the system will immediately liquidate all positions.
If risk rate ≥100% but still within the margin call period: No immediate liquidation, only a margin call notification.
If risk rate ≥80%: The system will send a risk alert, reminding you to add margin or reduce positions promptly.
In Unified Account Mode:
When the total maintenance margin rate of the unified account drops to 100% or below, the system will automatically trigger partial forced liquidation to reduce risk. The process is as follows:
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Priority Order Cancellation and Position Reduction
- The system will first cancel open orders occupying high margin and check if the margin rate returns to normal.
- If still insufficient, the system will liquidate short options positions by priority, then repay borrowing liabilities.
- During liquidation, positions with high liquidity and risk are reduced first, using batch reductions to minimize market impact.
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Market and Settlement Price Execution
- The system will prioritize executing orders in the secondary market; if liquidity is insufficient, remaining positions will be taken over at the settlement price.
- After each liquidation, the system recalculates the total maintenance margin rate. Once it recovers to >100%, liquidation stops and the remaining positions can be held.
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Special Case Handling
- If there is extreme market volatility, all positions may be liquidated or even result in negative equity.
- The system will use the insurance fund to cover negative equity losses and, if necessary, initiate manual review and processing.
What Is a Market Order?
A market order is an order type that is executed immediately at the best available price in the market: buy orders are filled at the best ask price, and sell orders at the best bid price. If a single order cannot be fully filled at one price level, the system will automatically match deeper order book levels and settle at a weighted average price. If there is insufficient liquidity, the order book price disappears, or the price deviates too much from the mark price, the market order may be restricted or partially filled and then automatically canceled.
What Is IV Order Functionality?
IV order (Implied Volatility order) is a way to place options orders using “implied volatility (IV)” instead of price. You simply enter the IV you want to trade at, and the system automatically converts that IV into the corresponding price and places it on the order book. As the market changes, your order will always be displayed based on the IV you set. IV orders are particularly suitable for professional traders, as they allow you to quote by volatility instead of constantly adjusting your order price.
What Is Advanced Order Functionality?
Advanced order functionality is a limit order feature designed for professional traders, offering more precise order control. It supports various execution rules such as Post Only, IOC, and FOK, allowing users to choose strategies like “post only without taking liquidity,” “immediate execution but partial cancellation,” or “must be fully filled at once.” This enables more flexible order logic, more controllable execution, and better fee performance in trading.
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