Trading crypto options are a great way to diversify your portfolio and hedge your risk. Options allow you to buy or sell an underlying asset at a fixed price on a specific date. If the price moves in the direction you predicted, you make money; if not, you lose money.
What is an Option?
A stock option is a financial contract between two parties, the buyer and the seller of the option. The buyer calls their broker and asks them to buy at-the-money put options on Apple stock. This means that they want to purchase the right to sell 100 shares of Apple at its current market value, even if it drops in price.
You might buy call options on Microsoft’s stock with trade crypto options because you think its price will go up over time. If it does, your call option will also increase in value.
The buyer pays a premium for this right and can lose all or part of that money without exercising their right (i.e., buying or selling).
Options are a great way to make money but are also risky. If you don’t know what you are doing and how to trade options effectively, it can be easy to lose money. Crypto traders should ensure not to get caught up in the hype of fast ROI (return on investment). The market moves quickly, but that’s no reason for them not to learn about risk management and other trading strategies before jumping in head first. Always remember that your ROI is only one factor out of many when it comes to making money with crypto options trading.
If someone tells you that their bitcoin option system has an ROI of 200%, then run away as fast as possible. Any system claiming such returns should be treated with suspicion because this isn’t possible in any regulated market like bitcoin options trading or forex/CFD trading.
The crypto options market is highly liquid. The assets that make up the underlying assets for these options are highly liquid, which means that you can easily enter or exit your positions at any time.
In addition to being a 24/7 global market, there is a large number of traders who are actively trading in the crypto options space. This means that there’s always someone on the other side of your trade if you need to exit or close out a position quickly.
Low Barriers to Entry
There are no minimum deposits or trade sizes to worry about. You can open a free account with as little as $5 and trade your money in any amounts you like.
Most platforms also have no minimum trade frequency or volume requirements, so nothing stops you from making an extra small deposit and occasionally trading when the mood strikes.
Other benefits include Fde:
- No minimum account balance requirements
- No minimum account age requirements
- No minimum account type requirements
- No minimum account verification requirements
The options market is a versatile and robust trading platform. You can trade on any underlying asset, and there are many ways to structure your trade. With crypto, the possibilities are even greater as you have many coins to choose from and can create various spread strategies. For example, if you choose Ethereum (ETH) as your underlying asset in a bull call spread strategy, you will buy one call option contract of ETH with a strike price of $400 and sell two other contracts with strikes at $500 or above.
Let’s say you want to buy some exposure via this bull call spread but also want some short-term protection against an unexpected drop in price over the next few days. You could do this by adding another options contract for Ethereum with a $400 strike price—this would effectively create a bull put spread instead of buying calls only because it increases the overall delta value across all three contracts.
How to Trade Options
Buy Call Option
This is an option to purchase an asset at a certain price by a certain time. The buyer pays a premium for the option and, if exercised, must buy the underlying security at the strike price.
Buy Put Option
This is an option to sell an asset at a certain price by a certain time. The buyer pays a premium for the option and, if exercised, must sell the underlying security at the strike price.
Short Call Option
(Covered) you’ve bought 100 shares of Nike Inc., which you hold in your brokerage account; however, you believe that Nike stock will fall in value over time — so much so that it’s better off owning 100 shares of something else instead. To hedge against this risk (and take advantage of potential short-term gains), you could sell covered call options against your existing holdings:
Trade Crypto Options
If you’re looking to trade cryptocurrencies, an option gives you leverage over many coins. You can buy or sell the underlying cryptocurrency and place limit and market orders with an option. If your prediction is correct, your profits will be magnified by your chosen strike price and premium amount. You should always remember never to use money that you can’t afford to lose with trading options because it is always possible that your prediction could be incorrect and lead to losses over any collateral held by the broker (read: margin call).
When it comes to trading in the stock market, you have a high degree of control over your trades and can make them at any time. In the foreign exchange markets, the world’s largest financial markets, you have almost no control over when you can enter or exit a trade—and even less control over how much money you will make from it. Trading in this market requires a special set of skills that many investors lack—and that’s why so many people choose cryptocurrency options instead.
Take advantage of these benefits while keeping your risk low by trading crypto options on top exchanges like BitMEX and OTCBTC. We hope this article has helped shed some light on what crypto options are all about. Now go forth (and profit).
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