Crypto Options Have Arrived on the Scene: Here’s Why They’re Different
27 Août 2021 - 08:59AM
NEWSBTC
Originally intended as a kind of digital cash for purchasing goods
and services without resorting to fiat currency, cryptocurrency
nowadays more resembles a commodity. More precisely, each digital
asset, from the original Bitcoin to altcoins like Ethereum and
Litecoin and even the so-called ‘meme coins’ such as Dogecoin,
functions as a commodity in an exchange market characterised by
high price volatility. Thanks to the availability of full-featured
crypto exchange apps that enable convenient access to the crypto
market for an increasing number of individuals around the world,
crypto trading is more popular than ever. These new traders are
less interested in having cryptocurrency for its own sake than in
having their coins appreciate in value and cashing in at a later
date. For the majority of crypto traders, crypto’s volatility is
the whole point. The dramatic price swings in a relatively short
time compared to traditional investment instruments can result in
fantastic profits for traders who play their cards right. As the
cryptocurrency market increasingly resembles the commodity market,
more sophisticated trading tools for cryptocurrency emerge based on
the latter. The latest to arrive on the scene are crypto options.
Experienced traders will already be familiar with options trading.
Options are derivative instruments in which the buyer reserves the
right to buy (Call) or sell (Put) the underlying asset at a
predetermined price (known as the strike price) and within a
specified time frame, effectively trading on what they think the
asset will be worth in the future rather than holding the asset
itself with the hope of selling it on down the line. So what makes
crypto options special? StormGain, a reputable crypto exchange that
has debuted a range of innovative crypto instruments, recently
rolled out crypto options on their platform. Now, rather than
simply being able to trade cryptocurrencies, StormGain users will
be able to place Call and Put option orders based on the potential
future price of the cryptocurrency. This means trading on the price
changes of a digital asset without having to actually own or hold
the asset itself. Crypto options are perfect if your main interest
in cryptocurrency is to profit from price volatility rather than
collect digital tokens. Why crypto and options trading are a
perfect match The prices of crypto options are more affordable than
buying the coins outright but also benefit from higher volatility,
allowing for much higher returns on your investment. For example,
even a relatively small movement on the price of Bitcoin will
affect the value of the option purchase by much higher multiples
(as options typically reserve the right to buy/sell in the
hundreds). At the time of writing, Bitcoin is trading at around
$38K. If the price were to go up to $40K, someone who bought a
Bitcoin would gain $2000 in profit, but someone who bought 100
options could gain $200000. At the same time, should the future
price of BTC not go your way, it is not possible to lose more than
your initial investment in buying the option, because you are not
obligated to exercise your option, only pay the initial price for
them. Options are great for a variety of trading strategies, such
as using long Calls (for a bullish approach) or Puts (when you
predict a bear market) to maximize your profits. More cautious
investors can even take both kinds of options on the same
underlying asset (known as straddling) or hedge by taking a Put
option on their holdings, which compensates for a potential
depreciation of the asset. So we can see that options trading leans
into all the advantages of trading cryptocurrency. When you want to
take advantage of volatility, it’s cheaper and easier to trade on
the price changes of different coins. On the other hand, one of the
main risks of cryptocurrency holding (an unexpected dip in price)
can be offset by hedging with options. For crypto fans, who
obsessively follow the wide range of digital assets, their
movements, and the accompanying influencers, options provide the
opportunity to intensify the game they are already playing – which
coins will go up and when? What will be the next big thing? Crypto
options open a wealth of more sophisticated trading strategies that
let you use your knowledge of the crypto market to make even more
profit from speculation. Stock option trading is occasionally
criticised for being risky, but this is a charge often leveled at
‘write’ options for Calls. These are when you sell the Call (the
right to purchase) to someone else for a premium. If the price of
the asset goes up, that forces you to sell at a potentially
unlimited loss. But StormGain’s crypto options are of the less
risky ‘hold’ variety, meaning that any potential losses cannot
exceed the initial investment. As such, the old adage of trading,
to never invest more than you can afford to lose, still holds true.
Where to trade crypto options To trade crypto options, you simply
need to choose a platform that offers them, usually as part of a
suite of other digital assets. The best platforms for trading
digital assets are specialised crypto exchanges. StormGain, which
offers crypto options along with favorable rates on a wide variety
of cryptocurrency purchases and exchanges, crypto wallets with up
to 12% APR interest, indices, and tokenized assets, maybe a good
choice, especially as it features a free demo account that can be
used to experiment with trading strategies before investing. To
trade options on StormGain, simply log into the web platform or
download the app, register with a few clicks, and select the
cryptocurrency asset. Under each, you’ll see an ‘options’ tab with
the details of the strike price and expiry date for each one.
Whichever platform you choose, make sure that it offers a good
range of bonuses and instruments. Remember, options are best used
as only part of a robust portfolio!
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