How to Use Options for Trading? Bitcoin Market Example (Part 2)
" For option buyers, the leverage ratio is directly proportional to risk. The higher the leverage, the lower the probability of the option being exercised. Although the upfront cost is lower, the probability of losing the entire invested amount also increases correspondingly. "
Strategy Overview:
In the previous article, we briefly covered what ATM (at-the-money) options are and some strategies for ATM options given the market conditions at that time. In this article, we'll cover what OTM (out-of-the-money) options are, how to use some OTM option strategies to navigate today's market, and demonstrate how to operate on the OKX trading page.
Based on the current market judgment that short-term weakness and consolidation make a one-sided decline unlikely, here are some simple OKX options simulated trading strategies:
1. A good approach is to simply sell OTM call options. Today's market showed no rebound at all (as long as it's not a sharp rebound), so the premium received from selling the option can be kept in full.
2. Selling OTM put options is also a relatively straightforward strategy. Since today's market moved as expected without a rapid decline, the time value of the option is quickly depleted, causing the option price to drop accordingly. Whether you close the position by buying back at a lower price or wait until the option expires and its value drops to zero, you can still earn a decent profit.
3. Here's an additional, slightly more advanced strategy: combine Strategy 1 and Strategy 2 by selling both OTM call options and OTM put options simultaneously. The benefit of doing this is that while you have the potential to earn double the premium, the risk doesn't increase significantly. Interested readers can think carefully about why this is the case.
OTM (out-of-the-money): An out-of-the-money option. For call options, it means the current underlying price is below the strike price. For put options, it means the current underlying price is above the strike price. Simply put, the price hasn't risen to the call price yet, or hasn't fallen to the put price yet.
As with the previous article, after entering the OKX options simulated trading page, it will display ATM option information for the nearest expiry date by default. So how do you find the OTM options we mentioned? It's simple — just click "All Options - This Week" in the red box, and all options for this week will appear. Shown in the screenshot below:
The current Bitcoin index is around 7,050. According to the definition, OTM options refer to call options with a strike price higher than 7,000, or put options with a strike price lower than 7,000 (since the 7,000 strike price is closest to 7,050, it is temporarily classified as an ATM at-the-money option). These are the two sections highlighted in red in the screenshot above.
Many readers may be confused — with so many out-of-the-money options, which one should you choose? Here's a tip that will also help clarify a common question: option leverage. First, click "List Settings" in the upper right corner, then check the box next to "Leverage Ratio" and click Confirm. This will display the leverage for each option on the page, as shown in the blue highlighted area in the screenshot above.
Let us clarify one thing first: unlike perpetual swaps, options themselves do not have a concept of leverage, and the leverage ratio is not selected by the user — it is a value calculated by the system based on costs. Sharp readers may have already noticed from the chart — for call options, the higher the strike price, the higher the leverage ratio. The last few options stay at 2,000x due to the minimum quote increment. The significance of this leverage ratio is that, in addition to simply selecting a strike price to express your price target for a bullish outlook, you can also refer to the corresponding ratio to choose an option that fits your cost investment and risk profile.
Finally, a reminder: for option buyers, the leverage ratio is directly proportional to risk. The higher the leverage, the lower the probability of the option being exercised. Although the upfront cost is lower, the probability of losing the entire invested amount also increases correspondingly.
Recap of the first article in "How to Use Options for Trading":
ATM (at-the-money): An at-the-money option, whether call or put, refers to when the current underlying price is very close to or equal to the strike price.
This is the OKX options simulated trading page, which displays ATM option information for the nearest expiry date by default, covering the following aspects:
Red box: Shows the expiration date of this option, which can be understood as the delivery contract's expiry date. The expiration date in this screenshot is 4 PM Beijing Time this Friday. Below the red box, it shows the time remaining until the expiration date.
Green box: Shows the name of this option. From the option name, you can extract several pieces of information: The first segment TBTCUSD represents the underlying asset of the option, which is TBTCUSD — a virtual Bitcoin used in the simulated trading environment. In live trading, it uses BTCUSD, i.e., Bitcoin. The second segment 191213, like the red box, indicates the expiration date — December 13, 2019. The third segment 7000 represents a strike price of $7,000. This value is used to compare with the current market price of the underlying asset to calculate returns and liquidation prices. The fourth segment C (Call) represents a call option, which is also indicated in the Chinese text below; if it were P (Put), it would be a put option.
Blue box: Shows the current order book. Like futures contracts, red is the ask price, green is the bid price, and the numbers beside them represent the corresponding option quantities.
Yellow box: Shows some parameters of the option. The most important are the two parameters in the first row: the spot index and the mark price. The spot index directly affects the buying and selling prices of this option, and it is also the Bitcoin spot market price used to compare with the strike price at expiration to calculate returns and liquidation. Here, we must emphasize the mark price. The mark price is the fair value of this option calculated by the platform's system algorithm, and it also changes in real time.
Why is it important to emphasize the mark price? Because we noticed that in the simulated trading environment, there is a very large spread between the order book price and the mark price. This is like an item with an actual value of $5 being inflated to $15 due to buying frenzies. In this case, the best course of action is to sell at the market price rather than overpay to buy. This is also why some users say "Why did I lose 70% as soon as I bought?"
Disclaimer
This article may contain product-related content that does not apply to your region. This article is intended solely to provide general information and makes no responsibility for any factual errors or omissions. This article represents only the author's personal views and does not represent OKX's views. This article is not intended to provide any advice, including but not limited to: (i) investment advice or investment recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets (including stablecoins) involves a high level of risk and may be subject to significant price fluctuations, and may even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For questions about your specific circumstances, please consult your legal/tax/investment professional. The information in this article (including market data and statistics, if any) is provided for general reference purposes only. Although we have taken all reasonable precautions in preparing such data and charts, we assume no responsibility for any factual errors or omissions expressed herein. © 2025 OKX. This article may be reproduced or distributed in its entirety, or excerpts of 100 words or less may be used, provided that such use is for non-commercial purposes. Any reproduction or distribution of the full article must prominently state: "This article is copyrighted © 2025 OKX, used with permission." Permitted excerpts must cite the article title and include attribution, for example, "Article Title, [Author Name (if applicable)], © 2025 OKX." Some content may have been generated or assisted by artificial intelligence (AI) tools. Derivative works and other uses of this article are not permitted.
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