How puts work
A simple example: BTC trades at $60,000. You buy a 1-month $55,000 put for a $1,500 premium. Two possible outcomes at expiry:
- BTC > $55,000: the put expires worthless. You’ve lost the $1,500 premium.
- BTC < $55,000: the put has intrinsic value of ($55,000 − settlement price). At $50,000 settlement, your put is worth $5,000 — a $3,500 profit after subtracting premium.
The strike and expiry determine cost. Puts closer to the money (higher strike) cost more premium but offer more protection. Longer-dated puts cost more but buy you time. Crypto options are European-style on most venues (exercisable only at expiry) and settle in cash, not the underlying asset.
Common put strategies
- Protective put — buy a put to hedge an existing long spot position. Caps downside in exchange for the premium.
- Cash-secured put — sell a put below current price, fully collateralized. If assigned, you buy the asset at the strike (which you wanted anyway at that level); if not, you pocket the premium.
- Bear put spread — buy a put at one strike, sell another at a lower strike. Caps both the cost and the maximum profit; cleaner tail-risk bet than outright puts.
Risks and considerations
Buying puts is limited-risk (max loss = premium) but probabilistically biased against you: most puts expire worthless because markets drift up more often than they crash. Selling puts is unlimited-risk unless cash-secured — a flash crash can force an assignment at the strike while the asset keeps falling. Crypto options also have wider bid-ask spreads than BTC spot or perps, so entering and exiting midsize positions can cost meaningful slippage. Implied volatility is the real price you pay: a put bought before a known event (halving, FOMC, ETF decision) is expensive precisely because IV is elevated. If the event resolves calmly, the IV crush alone can make a “right direction” put a net loss.