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Crypto Trading Instruments: Spot, Futures and Options

Spot, futures and options are three different contracts on the same coin, with different fees, different mechanics and different ways of losing money. Choosing the wrong one for the job is one of the earliest beginner mistakes: scalping spot pays five times the fees for half the setups, scalping options fights time and volatility as well as price, and holding a perpetual overnight pays rent that a spot holder does not.

The three lessons here, in reading order, explain each instrument, where it came from, what it costs and what it is for, so that the choice is made on the mechanics rather than on habit.

Start here​

  1. Crypto Spot Trading Explained: owning the coin; no leverage, no funding, no liquidation, and why that is the wrong fit for scalping
  2. Crypto Futures Trading Explained: dated contracts, the perpetual and its funding, margin, the mark price and the engine
  3. Crypto Options Trading Explained: rights against obligations, calls and puts, and why options are for hedging and volatility

Instruments overview​

  • Spot Trading: the reference every derivative is priced from; the instrument for holding and for the other leg of a basis trade
  • Crypto Futures: the scalper's instrument; shorting as a sell order, maker fees a fraction of spot's, and a liquidation price to keep beyond the stop
  • Crypto Options: insurance and volatility; the door to the thirteen-lesson options track

FAQ​

Why do most scalpers use perpetual futures instead of spot? A short is a sell order rather than a loan, the maker fee at the entry tier is a fraction of the spot fee, BTC and ETH perpetuals are the deepest books in crypto, and margin lets a stop-based position be held with a fraction of its notional. The price of those features is a liquidation price, which the stop must always sit closer than. See Crypto Futures.

What is the difference between a perpetual and a dated future? A dated future expires on a set date and converges to spot as it does; a perpetual never expires and is kept close to spot by funding, a periodic payment from the crowded side to the other. See Crypto Futures and Funding Rates.

Are options suitable for scalping? Not for direction. An option's price moves with time and implied volatility as well as with the underlying, and a buyer who calls the direction correctly can still lose when volatility falls. Options are for insuring a position and for trading the size of moves. See Crypto Options and the options track.

Can a spot position be liquidated? No. Spot is owned outright and nothing closes it for you. It can lose value like any position, and the recovery arithmetic in risk of ruin applies to it exactly.

This content is educational only. Not financial advice. See disclaimer.

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