The Derivatives Glossary

Crypto derivatives trade around the clock, every day, with no market hours or holidays. Risk doesn't pause overnight, so open positions and stops matter at all times.

The obligation that lands on an option seller when a buyer exercises. The seller must honour the contract at the strike.

A backstop: when a liquidation can't be filled in the market, the system reduces opposing profitable positions to keep the exchange solvent. Rare, but a real tail risk of high leverage.

When futures trade below spot, often during heavy short demand or fear. A discount basis.

The price at which a position's losses equal the entire margin posted and equity hits zero. Liquidation is designed to trigger before this point.

The gap between a derivative's price and spot. Funding keeps a perpetual's basis narrow; a persistently wide basis signals strong one-sided demand.

Buying a put and selling a lower-strike put for a moderately bearish view, with defined risk and reward.

The gap between the highest bid and lowest ask. Tight spreads signal a liquid, efficient market; wide ones signal thin trading and higher cost.

The first and largest cryptocurrency by market cap, and the most-traded underlying for crypto derivatives. Its deep, round-the-clock market makes it the reference asset of the space.

The distributed ledger that records crypto transactions across a network, making the underlying assets verifiable and tamper-resistant.

A move beyond established support or resistance, often on rising volume, signalling a potential new trend.

Buying a call and selling a higher-strike call to express a moderately bullish view at lower cost, with capped profit and loss.

The right to buy the underlying at the strike. Buyers profit if price rises well above the strike before expiry.

A chart element showing open, high, low and close for a period, with colour signalling direction. The default view for most traders.

When futures trade above spot, usually reflecting bullish positioning or carrying cost. A premium basis.

The standardised unit of trading. Contract size sets how much underlying one unit represents and how P&L scales with price.

Holding the underlying and selling a call against it to earn premium, capping upside in exchange for income.

A mode where the whole account balance backs every open position as a shared pool. It lowers the chance of one liquidation but exposes the full balance to a bad trade.

A futures contract with a fixed expiry, as opposed to a perpetual. Its price converges to spot as expiry nears.

How much an option's price moves for a one-unit move in the underlying, and a rough proxy for the probability of finishing in the money. The most-watched Greek.

A position structured so net delta is near zero and insensitive to small directional moves. The basis for strategies that profit from volatility, funding or time decay rather than direction.

The volume of resting orders at successive price levels. Deep books absorb large trades with little slippage; shallow books move on small size.

A contract whose value comes from an underlying asset rather than the asset itself. You trade a contract on Bitcoin's price, not Bitcoin. Futures, perpetuals and options are all derivatives.

The second-largest crypto and a major derivatives underlying, with its own active perpetual and options markets.

Acting on an option's right to buy or sell at the strike. Most crypto options are cash-settled, so exercise pays the difference rather than delivering the asset.

The date an option or dated future ceases to exist, after which it's exercised, settled, or worthless. Perpetuals have no expiry.

The theoretical price of a derivative given spot, carry, time and volatility. Market price oscillates around it.

An order that must execute in full immediately or be cancelled entirely, with no partial fills.

How often funding is exchanged, commonly every eight hours. You only pay or receive it if you hold a position across the funding timestamp.

A small periodic payment exchanged between longs and shorts that keeps a perpetual pinned to spot. Positive rate: longs pay shorts. Negative: shorts pay longs. It replaces the expiry-and-roll cycle.

A market-neutral strategy: hold a perpetual and an offsetting spot or futures position to collect funding while hedging out direction. Returns come from the funding spread, not from calling the market.

An agreement to buy or sell an asset at a set price on a future date. Dated crypto futures behave much like equity index futures; perpetuals are the no-expiry variant.

The rate at which delta itself changes as the underlying moves. High gamma means directional sensitivity shifts fast, a key risk near the strike and near expiry.

An order that stays active until it fills or you cancel it, rather than expiring at session end.

Opening a position to offset risk in another, for example shorting a perpetual to protect a holding without selling it. The original purpose of derivatives.

How much the underlying has actually moved over a past window; the realised counterpart to implied volatility.

The market's forecast of future movement, backed out of current option prices. Rising IV lifts premiums; it measures expected turbulence, not direction.

An aggregated spot price drawn from multiple exchanges, used as the anchor the mark price references. Multiple sources make it hard to manipulate.

The minimum capital required to open a position. Higher leverage means lower initial margin and a thinner buffer.

Positions are margined and settled in Indian rupees, removing the conversion layer and foreign-currency exposure of stablecoin-settled products.

A reserve that absorbs the shortfall when a liquidation closes below the bankruptcy price, protecting winning traders from socialised losses.

The portion of premium backed by real moneyness, meaning how far in-the-money the option is. Everything above intrinsic value is time value.

Selling an out-of-the-money call spread and put spread together to profit when price stays range-bound. A defined-risk income strategy.

A mode where margin is ring-fenced per position. Maximum loss on that trade is the margin allocated to it; the rest of the account is insulated.

A sharp drop in implied volatility, often right after a scheduled event, that deflates option premiums even when direction was right. The classic trap for event-day buyers.

Know Your Customer is the identity verification every regulated platform must complete before you trade. A legal anti-money-laundering obligation, not an optional step.

The price of the most recent executed trade. It can briefly diverge from mark price in volatility, which is why liquidations run off mark price, not LTP.

The multiple by which position size exceeds deposited capital. It amplifies gains and losses equally. NIYAM caps leverage at up to 25x, a deliberate design choice to keep risk legible.

An order to execute only at a specified price or better. You control the price but not whether it fills. The default tool for disciplined entries and exits.

Forced closure of a position when losses consume the maintenance margin. It caps loss at roughly the margin posted, but the position is gone. Managing leverage is how you avoid it.

A chain reaction where one wave of liquidations pushes price further, triggering more. Common in over-leveraged markets and the source of violent wicks.

The price at which a position is automatically closed. Knowing it before you enter, not after, is the difference between a planned trade and a hopeful one.

How easily a position can be opened or closed without moving price. Deep liquidity means tighter spreads and more reliable execution; it's infrastructure, not a feature.

A price area thick with resting orders and stops, where the market often reacts sharply as those orders trigger.

A position that profits when price rises. You buy expecting to sell higher.

The balance of long versus short positioning across the market, used as a sentiment gauge. Crowded one-sided positioning often precedes a squeeze.

Moving Average Convergence Divergence is a momentum indicator built from the relationship between two moving averages, used to spot shifts in trend.

The minimum equity a position must retain to stay open. Fall below it and liquidation begins. The gap between your margin and this level is your real breathing room.

A maker posts a resting order that adds liquidity; a taker hits an existing order and removes it. Takers usually pay higher fees, rewarding makers for providing depth.

Capital posted to open and hold a leveraged position. It's collateral against losses, not the cost of the position. If losses erode it past a threshold, the position is liquidated.

A warning that equity is nearing the maintenance level and more margin is needed to avoid liquidation. On fast markets the window can be very short.

A reference price derived from spot and funding, not the last trade, used to calculate unrealised P&L and trigger liquidations. It stops a single manipulated print from wiping out positions.

An asset's price multiplied by its circulating supply, used as a measure of size. Larger-cap assets tend to have deeper, less manipulable derivatives markets.

An instruction to execute immediately at the best available price. Fast, but you accept whatever the book offers; in thin markets that means slippage.

An option's strike relative to spot. In-the-money has intrinsic value; at-the-money sits near spot; out-of-the-money is pure time value and decays to zero if price doesn't move.

The average price over a set window, smoothing noise to reveal trend. Crossovers between fast and slow averages are common signals.

The full value of the exposure you control, not the capital you posted. With leverage a small margin can carry a large notional, which is why sizing matters more than entry timing.

The total number of outstanding contracts not yet closed. Rising OI with a price move suggests conviction; falling OI suggests positions unwinding.

A contract giving the right, not the obligation, to buy or sell an asset at a set price by a set date. A buyer's loss is capped at the premium, making it the defined-risk member of the family.

The full grid of available strikes and expiries for an underlying, with live premiums, volume and open interest. The trader's primary options dashboard.

The live list of buy (bid) and sell (ask) orders at each price. Its depth shows how much size the market can absorb before price moves.

A futures contract with no expiry date. A funding mechanism keeps its price tethered to spot, letting you hold a leveraged position indefinitely.

Your open exposure in a contract: its direction, size and entry price. It stays live, with P&L moving continuously, until you close it.

Deciding how much capital to risk on a trade relative to account size and stop distance. On leveraged products it's the single biggest determinant of survival.

A limit order that will only add liquidity to the book, cancelled if it would execute immediately. Used to secure maker fees and avoid crossing the spread.

The price paid to buy an option. For the buyer it's the maximum loss; for the seller it's income received for taking on obligation.

Buying a put against a long position as insurance against a fall, paying premium to cap downside.

The right to sell the underlying at the strike. Buyers profit if price falls below it. It is also a tool for hedging a long.

Profit or loss locked in once a position is closed. This is the figure that matters for the account and for tax.

An order that can only shrink an existing position, never flip or increase it. A guardrail against accidental exposure the wrong way.

A price level where selling has historically capped rallies. A break above can signal continuation.

Sensitivity to interest rates. Usually the least significant Greek for short-dated crypto options.

The ratio of potential profit to potential loss on a trade. A 1:3 ratio risks one unit to make three, letting you be profitable while wrong more often than right.

Closing an expiring dated future and reopening in the next series to keep exposure. Perpetuals remove the need to roll; funding does it continuously.

The Relative Strength Index, a 0–100 momentum oscillator flagging overbought or oversold conditions.

How a contract resolves into cash or asset. On NIYAM, contracts are INR-settled; gains and losses are realised in rupees within the Indian banking system.

A position that profits when price falls. Derivatives let you short as easily as you go long. This is the core structural advantage over spot-only trading.

A sharp upward move that forces shorts to buy back at a loss, accelerating the rally. The mirror image is a long squeeze.

The difference between the price you expected and the price you got. It widens in fast or thin markets and is the hidden cost of market orders on size.

Buying or selling the actual asset for immediate ownership, with no leverage and no expiry. The opposite of a derivative, where you trade exposure to price rather than the asset.

A crypto designed to hold a steady value, usually pegged to the US dollar. Many global platforms settle derivatives in stablecoins; NIYAM settles in INR instead.

An order that activates once price hits a trigger, then executes as a market or limit order. The mechanism behind stop-losses.

A pre-set order to close a position if it moves against you past a defined level. On leveraged products it's not optional discipline; it's the primary defence against liquidation.

Buying a call and a put at the same strike to profit from a large move in either direction. Profits from volatility, loses to time decay if price stalls.

Like a straddle but with out-of-the-money strikes. It is cheaper to enter but needs a bigger move to pay off.

The fixed price at which an option can be exercised. Its distance from spot decides whether the option is in, at, or out of the money.

A price level where buying has historically halted declines. Traders watch it for bounces or, if broken, for breakdowns.

A pre-set order to close a position once it reaches a target, removing the temptation to hold a winner too long.

A set of measures describing how an option's price reacts to direction, time, volatility and rate of change. The core risk vocabulary of any options trader.

Time decay is how much value an option loses per day, all else equal. It works against buyers and for sellers, accelerating into expiry.

The part of premium beyond intrinsic value, reflecting the chance the option gains before expiry. It erodes as expiry nears.

A stop-loss that moves with price in your favour, locking in profit while letting a trend run. It only tightens, never loosens.

The prevailing direction of price over time: up, down or sideways. Trading with the trend stacks probability in your favour.

The asset a derivative is priced against. For a BTC perpetual, the underlying is Bitcoin's spot price. The contract tracks it but is a separate instrument with its own order book.

Profit or loss on an open position at current mark price. It moves continuously, isn't locked in until you close, and can pull equity toward liquidation.

Sensitivity to implied volatility. When the market expects bigger swings, premiums rise even if spot hasn't moved. Vega measures that.

The term Indian tax law uses for crypto and similar assets. How an instrument is classified affects how it's taxed, which is why the spot-versus-derivative distinction matters.

The degree of price fluctuation. Crypto's higher volatility versus equities means leverage needs more care, and option premiums tend to run richer.

The number of contracts traded in a period. High volume confirms the strength of a move; thin volume makes a move suspect.

Software or hardware that stores the keys controlling crypto holdings. Relevant for spot custody; on a derivatives platform you trade contracts settled in your account.

The thin line above or below a candle body marking the extreme price reached. Long wicks signal rejection of a level, often from a liquidation flush.

The return earned from the funding or basis spread rather than from price direction. For example, the income a delta-neutral funding-arbitrage position collects over time. A way to generate returns without taking a directional bet.

A market where one trader's gain is matched by another's loss; every long is paired with a short. Derivatives are zero-sum before costs, which is why edge, discipline and risk control decide outcomes, not the asset simply rising over time.