Crypto Trading Binance Options 3 — Questions and Answers
Question 1: What does the Greek 'Theta' represent for a Binance option?
- Sensitivity to volatility
- Time decay of the option's value (Correct answer)
- Sensitivity to interest rates
- Rate of change of delta
Correct answer: Time decay of the option's value
Theta measures how much an option loses value as time passes toward expiry.
Question 2: A put option on Binance becomes more valuable when the underlying price does what?
- Rises above the strike
- Falls below the strike (Correct answer)
- Stays exactly at the strike
- Becomes more stable
Correct answer: Falls below the strike
A put gains intrinsic value as the underlying price falls below the strike.
Question 3: What is meant by an option being 'in-the-money' (ITM)?
- It has no intrinsic value
- Exercising it would be profitable in intrinsic terms (Correct answer)
- It has expired
- The premium equals zero
Correct answer: Exercising it would be profitable in intrinsic terms
An in-the-money option has intrinsic value, meaning exercising it would yield a gain.
Question 4: On Binance Options, who receives the premium when a contract is sold?
- The option buyer
- The option seller (writer) (Correct answer)
- Binance only
- Both parties equally
Correct answer: The option seller (writer)
The seller (writer) of an option collects the premium paid by the buyer.
Question 5: What does 'implied volatility' indicate in options trading?
- The historical price range of the asset
- The market's expectation of future volatility (Correct answer)
- The exact future price
- The option's expiry date
Correct answer: The market's expectation of future volatility
Implied volatility reflects the market's forecast of how volatile the underlying will be.
Question 6: Which Greek measures an option's sensitivity to changes in implied volatility?
- Vega (Correct answer)
- Delta
- Theta
- Gamma
Correct answer: Vega
Vega measures how much an option's price changes when implied volatility shifts.
Question 7: If you expect a crypto asset to stay flat near a strike, which strategy benefits from time decay?
- Buying a call
- Buying a put
- Selling (writing) options (Correct answer)
- Buying a straddle
Correct answer: Selling (writing) options
Selling options profits from time decay (Theta) when prices stay range-bound.
Crypto Trading Binance Options 3
What does the Greek 'Theta' represent for a Binance option?