Learn How to Trade
Trading short term options on Light.CX is fast and easy. You simply choose a strike price, expiration time, and then decide if you believe the market will finish above or below the strike.
Light.CX is an open market trading platform. Our software trading platform displays current offers to buy and sell options. Market participants may choose to accept a current offer, or submit their own offer to the public market.
Bid and Ask
A “Bid” is an offer to buy an option. Buying an option means that the trader thinks the price will be over the strike at expiration.
An “Ask” is an offer to sell an option. Selling an option means that the trader thinks the price will not be over the strike at expiration.
There may be multiple people offering to buy and sell at many different prices. The list of these offers is call an “orderbook”. Remember, Light.CX doesn’t create the market or prices, traders submit their offers to buy and sell.
If you want to buy from the market, our system will fill your request at the best (lowest) possible price. As an example, if you want to buy 5 contracts of an option, you may get matched with multiple sellers:
- Seller #1 offers 2 contracts at $5.50
- Seller #2 offers 1 contract at $5.66
- Seller #3 offers 2 contracts at $5.70
So, your total cost for the 5 contracts would be $28.00, with an average price of $5.60 per contract.
If you wanted to sell at the market price, our system would fill your request starting with the best (highest) possible price and working downward thought the offers.
Market order vs. Limit order
You trade on our platform buy submitting orders to buy and sell. There are two types of orders you can use:
Market order. This will buy or sell for you at the best available price from existing offers in the market. There is an example of this in the section above.
Limit order. You tell us exactly what your price limit is, and we’ll match as much of your order as possible, without going beyond that limit. Any unfilled portion of your order will remain in the public order book as an offer for other traders to match. If you submit a buy limit order, we won’t match orders above your limit price. (I want to buy 10 option contracts, and don’t go over $6.30.) If you submit a sell limit order, we won’t match orders below your limit price. (I want to sell 10 contracts, don’t go below $4.30)
For example: You want to buy the 5 contracts for Bitcoin USD to close above $7500. The current best asking prices is $8.00, and there are 3 contracts available at that price. There are three ways you can submit a buy order:
- You can accept the best asking price and submit a market buy order. A contract will immediately be created between you and the first seller for 3 contracts at $8.00. A second contract will be created for the 2 contracts at the next highest price of $8.10. You’ve bought all five contracts with an average price of $8.04.
- You can submit a limit buy order for 5 contracts $8.00. A contract will immediately be created between you and the first seller for 3 contracts at $8.00. You will then have a pending offer to buy 2 contracts at $8.00. You can wait to see if someone comes along and agrees to sell you 2 at $8.00, or you can cancel that pending 2.
- You can submit a limit buy order for 3 contracts $8.00. A contract will immediately be created between you and the first seller for 3 contracts at $8.00.
Orders and Contracts
As we discussed above, you trade by submitting orders to the market. Orders are not contracts. An order only becomes a contract if it is matched to another trader.
Since orders are only offers to the public, and not matched to anyone, you are free to cancel orders at any time. You may not cancel a contract, as it represents a binding agreement between you and the seller.
When you submit an order, we immediately place a hold on your funds equal to the collateral of that order. When an order is matched and becomes a contract, we actually deduct the collateral from your account. If you win the contract at expiration time, we immediately credit the payout back to your account