Gate Options Introduction

What Are Options?

Options offered by Gate are financial derivatives designed for cryptocurrency markets.
An option is a contract between a buyer and a seller.
The buyer pays a fee (the premium) to the seller in exchange for the right to buy or sell a specified amount of the underlying asset at a predetermined price on a specified future date.
The option buyer may choose whether to exercise the option at expiration, and the option seller assumes the obligation to fulfill the contract if the option is exercised.

What Is Demo Trading?

Demo trading allows users to trade options contracts using simulated funds on the testnet. The trading interface and functions are identical to live trading and are clearly labeled as "Demo Trading."
In demo trading, no real costs are incurred. The funds are provided by the platform and are for experience and testing purposes only.

How to Read an Options Name

For simplicity, options contracts are represented using a standardized format: Market – Expiration Date – Strike Price – Type

• Market: The underlying trading pair
• Expiration Date: Format yymmdd (e.g., 250627 = June 27, 2025)
• Strike Price: The agreed execution price
• Type: C = Call Options, P = Put Options

Example: BTC-250627-18500-C represents a BTC call option with an expiration date of June 27, 2025, and a strike price of 18,500 USDT.

Common Terms

• Underlying Asset: The cryptocurrency specified in the options contract.
• Premium: The fee paid by the option buyer to the seller for the right, but not the obligation, to exercise the option at expiration.

Buying a Call/Put Option: Premium = Order Price × Abs(Order Amount) × Contract Multiplier

• Expiration Date: The last date on which the option may be exercised. European-style options can only be exercised at expiration.
• Strike Price: The agreed price at which the underlying asset may be bought or sold at expiration.
• Option Type: Call or Put.

What Are ITM, ATM, and OTM?

In options trading, ITM, ATM, and OTM are used to describe the "moneyness" of an option. That is, the relationship between the strike price and the current underlying price.

ATM (At The Money): Strike price ≈ underlying price
ITM (In The Money): Options that have intrinsic values.
OTM (Out of the Money): Options that have no intrinsic value.

Value & Profit and Loss (PnL) Calculation

• Unrealized PnL: The floating profit or loss of an open position, calculated based on the last price and fluctuating with market price movements.
  Unrealized PnL = (Mark Price – Entry Price) × Contract Multiplier × Amount

• Realized PnL: The profit or loss that has been settled, including trading fees and PnL generated from closing positions.
  Realized PnL = Trading Fees + Closing PnL

• Expiration PnL: The profit or loss calculated at expiration based on the difference between the strike price and the settlement (market) price.
  ATM/OTM Options: Not exercised, PnL = 0
  ITM Options: Automatically exercised
  PnL = (Settlement Price – Strike Price) × Contract Multiplier × Amount – Exercise Fee
  Note: Expiration PnL reflects the intrinsic value only and does not include the premium paid to purchase the option.

All Options on Gate Are Cash-Settled

Cash-settled options are those in which no physical delivery of the underlying asset occurs upon expiration or exercise. Instead, profit or loss is settled in cash based on the difference between the market price of the underlying asset and the strike price.
When a cash-settled option is exercised, only the price difference between the strike price and the current market price is credited to the option buyer's account.
At expiration

• Call Options
• If the market price is higher than the strike price at expiration, the buyer receives cash equal to (Market Price – Strike Price) × Contract Multiplier.
• If the market price is less than or equal to the strike price, the option expires worthless, and the buyer loses the premium paid.
• Put Options
• If the market price is lower than the strike price at expiration, the buyer receives cash equal to (Strike Price – Market Price) × Contract Multiplier.
• If the market price is greater than or equal to the strike price, the option expires worthless, and the buyer loses the premium paid.

What Is Initial Margin (IM)?r

IM is the minimum amount required to open a position.
For option sellers, the IM is the minimum amount required to open a short option position. It is designed to cover potential risk exposure and is dynamically calculated based on the underlying price, the option's Out-of-The-Money (OTM) amount, and system-defined margin ratios.
The margin frozen at the position opening is calculated as:
IM = [Max(Margin Ratio₁ × Underlying Price, Margin Ratio₂ × Underlying Price – OTM Amount) + Option Price] × Contract Multiplier
Example:
Selling a BTC call option with an underlying price of $115,000, a strike price of $116,000, and an option price of $200.
IM ≈ [Max(0.1 × 115,000, 0.15 × 115,000 – 1,000) + 200] × 0.01 = $164.5

What Is Maintenance Margin (MM)?

MM is the minimum amount required to keep the position from being liquidated.
While holding a position, the account must maintain the minimum margin level to prevent excessive risk from market fluctuations. If the account margin falls below the required MM, liquidation will be triggered to limit further losses.
MM = (Maintenance Margin Ratio (MMR) × Underlying Price + Option Price) × Contract Multiplier
Example: MM ≈ (0.075 × 115,000 + 200) × 0.01 = $88.25

What Is Risk Control Price?

The risk control price is calculated by applying predefined percentage adjustments above and below the mark price, resulting in an upper and a lower risk control price. The adjustment percentages vary by options contracts.
The risk control price serves two primary purposes. First, it is used to calculate position value and determine whether account equity has become negative. Second, in cases where a position needs to be reduced and market liquidity is insufficient, the system may take over part of the position at the risk control price.

What Is Liquidation?

In Classic Account

The system continuously monitors the account margin level and equity. If the equity calculated based on the risk control price becomes negative, the account will be immediately taken over by the system.
When the margin level is at or above 100% and the margin call period has expired:

• The system will first cancel open orders with the highest margin requirement to reduce risk.
• If the margin level remains above the required threshold, the system will automatically reduce short positions. If market liquidity is insufficient, the system will take over the corresponding position at the risk control price.

During order cancellation or position reduction, if equity based on the risk control price becomes negative at any time, all positions will be liquidated immediately.
When the margin level is at or above 100% but still within the margin call period, positions will not be immediately liquidated. A margin call notification will be issued, requiring additional margin.
When the margin level is at or above 80%, the system will issue a risk warning, reminding users to add margin or reduce the position size in a timely manner.

In Unified Account

When the MMR falls to 100% or below, a partial liquidation will be triggered immediately to reduce risk. The process is as follows:

• Order Cancellation and Position Reduction Priority

• The system will first cancel open orders with the highest margin requirement and reassess whether the margin ratio has returned to a safe level.

• If the margin ratio remains below the required threshold, the system will liquidate short options positions according to priority and subsequently repay outstanding loans.

• During the liquidation process, positions with higher liquidity and greater risk exposure will be reduced first. Position reduction will be executed in batches to minimize market impact.

• Market Execution and Risk Control Price

• The system will prioritize execution in the secondary market. If market liquidity is insufficient, any remaining positions will be taken over at the risk control price.

• After each liquidation round, the system recalculates the MMR. Once the ratio exceeds 100%, liquidation will cease, and any remaining positions may continue to be held.

• Special Circumstances

• In cases of extreme market volatility, all positions may be liquidated, and a bankruptcy may occur.

• The system will utilize the insurance fund to cover bankruptcy losses. If necessary, manual review procedures may be initiated.

What Is a Market Order?

A market order is an order that fills immediately at the best available price on the order book. Buy orders are filled at the current best ask price, while sell orders are filled at the current best bid price. If there is insufficient liquidity at a single price level, the system will continue matching at deeper levels and calculate a weighted-average fill price. If counterparty liquidity is insufficient, quoted prices disappear from the order book, or the fill price deviates significantly from the mark price, the market order may fail to be placed or be automatically canceled after partial fill.

What Is an IV Order?

An IV (Implied Volatility) order allows users to place an order by specifying the IV instead of the price. Simply enter the desired IV level, and the system will automatically convert it into the corresponding price and submit the order to the order book. As market conditions change, the order price will adjust dynamically based on the IV specified. IV orders are particularly suitable for professional traders, as they enable quoting and trading based on volatility rather than repeatedly adjusting prices in response to market movements.

What Are Advanced Order Types?

Advanced order types are enhanced limit order options that provide professional traders with greater control over order execution. They include Post Only, IOC (Immediate or Cancel), and FOK (Fill or Kill). These order types allow users to choose whether to place maker-only orders, execute immediately with partial fills permitted, or require full execution in a single transaction. By selecting the appropriate order type, traders can implement more flexible trading strategies, better control execution outcomes, and improve fee efficiency.

Gate reserves the final right of interpretation for this product.