Recently, Bitcoin’s price dropped 12% in two days. Some traders lost everything. Others made six figures. The difference? Regular trading differs from trading in futures and options. Futures and options trading may let a trader profit when prices fall. They may let a trader multiply gains with leverage. But they also lead to a trader losing more money than they invested. Understanding what options and futures trading are helps anyone benefit more from cryptocurrency.
For most people entering the industry, the simplest and most common approach is to buy Bitcoin or Ethereum on an exchange, transfer it to a personal wallet, and hold it in anticipation of price appreciation (this is called HODLing). Futures and options trading, however, are entirely different. These are financial derivatives—contracts whose value is derived from an underlying asset, such as the price of Bitcoin or Ethereum. Traders do not own the cryptocurrency. But they take leveraged positions based on their speculations about future prices.
What is futures and options trading?
Futures and options are two different ways to bet on prices without buying the assets.
Futures contracts are binding agreements to buy or sell a certain amount of an asset at a preset price on a specific future date (or, with no fixed expiration for perpetual futures, which instead use a ‘funding rate’—periodic payments between long and short traders to keep the contract price tethered to the spot market price).
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Taking a long position means traders are obligated to buy at that price at settlement; taking a short position means traders are obligated to sell. Most futures are cash-settled—no actual cryptocurrency changes hands, with profits or losses paid based on the price differences.
If the market moves against traders and they hold until settlement—for example, they went long expecting Bitcoin to rise, but it falls from an effective contract price of $95,000 to $60,000—they will end up with a significant loss. Traders can close positions early to get gains or limit losses. While early closing gives flexibility and control, doing nothing keeps the traders fully committed and at risk until the position is resolved—either by their action or by the contract’s natural end.
Options work differently from futures. When a trader buys an option, they pay a premium upfront for the right—but not the obligation—to buy (a call option) or sell (a put option) a cryptocurrency at a predetermined price by the expiration date that has been set. If the market conditions are not in favor of the position, the holder can just let the option to expire. In this situation, for the option buyer, the loss is just the initial premium paid, protecting them from any other liability. On the other hand, the selling options carry a much higher risk, as the seller’s losses can be far higher than the premium collected if the market moves against their position.
The main difference between the two lies in the shift from a mandatory obligation to a flexible one. In a futures contract, both parties are legally bound to the agreement; a trader holding a long position has to settle at the agreed price even if the market collapses. This may result in a cash loss that shows the adverse market price movement (with the loss depending on the total size of the contract).
On the other hand, an options buyer pays an upfront premium specifically for the right to walk away. It is possible to leave the option trade open and let it expire worthless if the market moves against it. The maximum loss is only the cost of the premium, with no additional capital or debt to be given. Much like futures, these instruments in the cryptocurrency space are typically settled in cash rather than through the physical delivery of the asset.
In cryptocurrency markets, both instruments are usually cash-settled rather than physically delivered.
Understanding the Complexity
Both instruments are complex, but options take it to another level. Futures trading is about predicting direction and magnitude. It mainly looks at only two simple questions: will the prices go up or down, and by how much?
Options add time as a third factor. It is not just predicting where the price will go, but when a trader will get there. Professional options traders spend years learning the statistical measures that forecast how option values shift under different conditions.
Futures are much simpler conceptually, but leverage combined with that binding obligation makes them ruthless. A trader can get the direction right and still get wiped out because the timing was off or they used too much leverage.
When to Use Which
Futures make sense when a trader has a strong conviction about where prices are heading soon and is willing to accept the risks. Futures markets are more liquid—easier to get in and out of—and pricing is usually transparent. If a trader believes in Bitcoin and wants leveraged exposure without buying more coins, futures do that.
Options work better when a trader is uncertain. If a trader thinks there will be big price swings but is not sure which direction, strategies like “straddles” let them profit from volatility. Options also work for hedging—protecting what a trader already owns. Holding a lot of Ethereum but worried about a short-term crash? Buy put options as insurance while keeping the holdings.
Confronting the Statistics
But here is an uncomfortable truth: most individual traders lose money on both futures and options. The market is mainly for professional traders and institutions with resources, as they have access to deep market knowledge.
A 2023 study by the CFA Institute, a global nonprofit professional organization for investment and finance professionals, showed that about 80% of retail options traders lost money over two years. Futures numbers tell a similar story. These are not get-rich-quick schemes but instruments that demand real knowledge, discipline, and comprehensive risk assessment.
If a trader needs to try options or futures trading, they must start small. Most platforms offer “paper trading,” where you can practice with fake money. A $150 option that expires worthless often teaches more about markets than months of reading.
Futures and options are very good tools, and with proper knowledge and disciplined risk management, they can serve a purpose. But for most people, the traditional approach of buying and holding may be boring, yet it is far less likely to wipe them out.
