Lesson 1: What is an Option?

Promise: Understand the contract. Premium now, conditional cashflow later.

The Core Idea

An option is a contract with five key parameters:

Parameter	Description	Example
Underlying	The asset the option is based on	BTC, ETH
Strike (K)	The price at which the contract settles	100,000
Expiry (T)	When the contract expires	2025-03-28
Type	Call or Put	C or P
Size (Q)	How much of the underlying	0.5 BTC

Now when you see a symbol like this, you can decode it (hover each part):

BTC-20250328-100000-C

Key Line

"An option is a conditional payout. You pay a premium to choose later whether the contract finishes worth anything."

Rights and Obligations

Options have two sides: buyer (long) and seller (short).

Long Call (You buy)

• Pay premium upfront

• Maximum loss is known: the premium you paid

• You benefit if the option finishes in-the-money

Short Call (You sell)

• Receive premium upfront

• Losses can be large: you owe the payoff if ITM

• The platform requires margin to cover potential losses

Important

If you buy options: max loss is known upfront. If you sell options: risk is transferred to you, so the platform requires margin.

Hypercall Exchange Rules

On Hypercall Exchange, options work as follows:

Feature	How It Works
Style	European (exercise only at expiry)
Settlement	Cash-settled (no asset delivery)
At expiry	Exchange positions settle automatically based on reference price

Hover over lime green terms to learn more about how they work.

You don't need to "exercise" anything manually for an Exchange position. At expiry, the system calculates intrinsic value and credits/debits your account automatically.

Common Mistakes

Mistake	Correction
Confusing premium with strike	Premium is what you pay/receive. Strike is the settlement reference price.
Thinking exercise is manual	On Hypercall Exchange, settlement is automatic at expiry.
Assuming "one option" = 1 BTC	You can trade fractional sizes (e.g., 0.1 BTC options).
Ignoring expiry time	Mainnet SPCX options expire at 4:00 PM ET. Testnet options currently expire at 08:00 UTC.

Test your understanding before moving on.

Q: What are the 5 key fields of an option contract?

Q: Long call vs short call: who has capped loss?

Q: What does 'cash-settled' mean in one sentence?

💡 Tip: Try answering each question yourself before revealing the answer.

See Also

• Instruments & Symbol Format
• Settlement Types

Navigation: ← Course Home | Lesson 2: Calls, Puts, Moneyness →