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MEV_and_trading/derivatives/options.md
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* options can be thought of as "insurance-like" contracts where one pays a premium upfront. profits come from "disaster events", with **capped losses** and **unlimited upsides**.
* purchasers of options receive the **right** to buy or sell the underlying asset at a predetermined **strike price**. **option chains** list **calls** (ability to buy the asset) and **puts** (ability to sell the asset) for a given expiration across a variety of **strikes**.
* options also gives leverage by chasing cheaper premiums (e.g. shortening expirations).
* buy (call) vs. sell (put):
* options contracts contain the following information:
- nature of the right: from the option buyers’ perspective, to buy (call) or sell (put) the asset.
- specification and quantity of underlying asset (e.g., 1 BTC).
- strike (or exercise) price: the price paid or received for the asset if the option is exercised.
- expiration date: the last date the option can be exercised.
- rules for exercise and settlement.
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