How to buy an option — the chain, bid/ask & the multiplier
Five episodes of foundations, and not once a real screen. Time to fix that. This is the hands-on one: how to read an options chain, why every option has two prices, what you're really spending, what happens on expiry day — and how to walk a full trade through a calculator.
- The options chain — what every column means
- Two prices — bid, ask and the spread you pay to get in
- Liquidity — which strikes to avoid
- The multiplier — what one contract actually costs
- Expiry day — automatic, cash settlement
- One full trade, walked through the calculator
Coming down to earth
For five episodes we've built foundations. You know what an option is, what its price is made of, you know the Greeks, and you can read volatility. And in all that time I have not once shown you what a real option looks like on a screen. It's a bit like teaching every dial in a car without pointing out where the steering wheel is. Today we fix that.
The options chain
The first thing you'll see is called the options chain. The name sounds intimidating; it's a table, and the logic is simple. At the top you pick an expiry date — a week out, a month out, a quarter out — and each date has its own table. Down the middle run the strikes, lowest to highest, in $2,000 steps. Along the sides sit calls and puts (usually calls left, puts right). Pick a date, find a strike, look at the price.
| Strike (call) | Bid | Ask | Volume | Open interest |
|---|---|---|---|---|
| 63,000 | 4,180 | 4,320 | 512 | 3,204 |
| 65,000 | 2,980 | 3,120 | 861 | 4,190 |
| 67,000 | 2,350 | 2,450 | 1,204 | 5,433 |
| 69,000 | 1,540 | 1,660 | 742 | 2,918 |
| 71,000 | 980 | 1,090 | 431 | 2,102 |
BTC calls · 30-day expiry · spot $67,000 · highlighted row = the at-the-money 67k call
Take that highlighted row up close. Bitcoin is at $67,000 and it's a call struck at $67,000, expiring in a month. Four numbers there are worth caring about. The first two are prices — we'll come back to them, because they matter more than they look. The third is volume: how many contracts changed hands today. The fourth is open interest: how many positions are open right now, how many contracts are still alive. The difference is simple — volume is movement, open interest is state.
Where people actually trade
Those last two columns are easier to grasp once you see them drawn. Plot volume by strike and trading clearly doesn't spread out evenly — a handful of strikes take almost everything and the rest sit empty. Plot open interest by strike and the tallest bars cluster at round numbers: 60k, 70k, 80k. Split the same data into calls and puts, or across expiry dates (usually month-ends and quarter-ends, where the largest contracts expire), and you can see not just where the trading is but which side it's on. For now, just hold onto this: these charts show where people actually trade. What that means is next episode — today you need them for one very practical reason.
Why there are two prices
Back to those first two numbers. An option doesn't have one price — it has two. Picture the board at a currency exchange counter: there are always two numbers, buy and sell. You want to buy euros, you pay more; you want to sell them, you get less; the difference stays with the exchange. Options work exactly the same way. The price you can sell at is the bid; the price you can buy at is the ask (always higher). The gap between them is the spread.
Concretely: bid $2,350, ask $2,450. You buy at 2,450, and if you wanted to sell it that same second you'd get 2,350 — a hundred dollars down before anything happened. That's the cost of simply getting in: 4% of the premium, handed over the moment you click. It isn't a scam — somebody has to be on the other side of your trade, ready at any moment, and they charge the spread for it.
Liquidity — which strikes to avoid
Stay with the exchange counter, because it leads to the second important thing. The same company, downtown and at the airport: downtown the gap between buy and sell is pennies; at the airport it's ten or fifteen percent — because there you have no choice, and nobody is competing for you. The options market is identical. Remember how volume didn't spread evenly? Those busy strikes are downtown — plenty of traders, tight spread. The empty ones are the airport: take a strike 30% away, expiring in six months, and the spread can run 30% of the premium or worse.
What one option actually costs — the multiplier
When you see the price of an option, that isn't always what you'll pay. Think of a wholesaler: the shelf says two dollars each, but they only sell in packs of a hundred — you won't spend two dollars, you'll spend two hundred. In options that number is the multiplier.
On US stocks, one contract is 100 shares — a $2 premium means you pay $200, the single most common source of shock for beginners. Crypto is easier: on Deribit, one Bitcoin option contract is one Bitcoin, so the multiplier is 1 and the premium you see is the premium you pay. One wrinkle worth knowing: the classic Deribit contracts quote the premium in Bitcoin (0.03 BTC — about $2,000 at $67k), while the newer ones quote straight in dollars. The mechanics are identical; only the currency your P/L shows up in differs. Check this once, on your first trade, and you won't have to think about it again.
Expiry day
What actually happens on expiry day? Start with when you're even allowed to exercise. There are two styles: European (exercise only on the expiry date itself) and American (any time before). Bitcoin options on Deribit are European, so you can't exercise early. But careful — this is where people get confused: you can't exercise early, yet you can sell at any time. Two completely different things, and most people simply sell the option rather than waiting it out.
Say you did wait. First: you don't have to do anything — settlement happens by itself, automatically, with no "exercise" button to press. Second, and this surprises people: nobody sends you any Bitcoin. Settlement is in cash — the exchange works out the difference and pays you. Concretely, you hold a call struck at $67,000 and on expiry day Bitcoin is at $72,000: your option gave you the right to buy at 67, the market pays 72, and the $5,000 difference lands in your account. If the option finishes out of the money, it simply disappears — you pay nothing extra, and your loss is the premium you spent at the start.
The calculator — three zones
Before you open any position, it's worth seeing all these numbers in one place — that's what an options calculator is for. A tool like that looks overwhelming at first: a dozen fields, two columns, a chart at the bottom. But the logic is simple and always the same. A calculator has three zones.
Zone one, on the left: what you fill in — four things. Buying or selling, call or put, which strike, which expiry. Everything else on the left is detail you don't need to touch at the start. Zone two, on the right: what you get back — what you'll pay, where your break-even sits, how much you can make, how much you can lose. Zone three, at the bottom: the payoff chart, showing what you'll have at different Bitcoin prices on expiry day. Fill in four things, get a complete answer.
If you ever see a number in a tool like this that makes no sense — theta larger than your entire position, say — it isn't you who's wrong. The Greeks have sensible sizes: theta is typically a fraction of a percent of the premium per day, not a multiple of it. If you see otherwise, check your settings or report a bug.
One trade, start to finish
Now walk a full trade — and watch it use everything from the last five episodes. Start with a thesis: Bitcoin goes up over the next month. So you pick a long call — buying the right to buy. For expiry, take 30 days, not the weekly: the weekly is cheaper, but theta would eat it far faster (episode 3). For the strike, take the one at the current price — delta comes out around 0.5, so you catch roughly half of Bitcoin's move. A strike further out would be cheaper, but delta drops and you'd need a much bigger move to make anything (the trade-off from episode 2).
The premium shown is exactly what you'll pay, because the multiplier is one. Enter how much you want to invest and the calculator works out the number of contracts — no mental arithmetic. Now the Greeks for this exact position: delta tells you what you make per $1 of Bitcoin; theta tells you what you lose per day of nothing happening. Compare theta to the premium — if theta is 1% of the premium per day, time alone costs you 1% every 24 hours, so the market has to move faster than that just to break even. On the right: break-even (the Bitcoin level where you actually start making money) and max loss, which on a bought option always equals the premium — you can't lose more, even if Bitcoin halves. And the payoff chart: the flat part on the left is your maximum loss, the point where the line crosses zero is break-even, and everything to the right is profit, rising in a straight line with price.
Where this leads
That was the last episode about how a single option works. From here on we look wider — not at your own position, but at what everybody else is doing. You saw those charts for a moment today, the ones showing where people trade; next episode we come back to them properly. You'll learn where the largest positions on the market sit, who opens them, and why that moves the price of Bitcoin itself.
Free e-book · the whole thing Crypto Options — from your first call to your first edge This episode puts episodes 1–5 onto a real screen. The complete e-book — free, no signup — has every chapter, diagram and worked example behind the course.
