Crypto Options – An Alternative To Regular Crypto Trading
Crypto enthusiasts are now really happy because of the launch of Bitcoin options and futures. However, many are still not familiar with fundamentals associated with crypto options.
Bitcoin options are highly advantageous for many since they allow them to take advantage of a market that is highly volatile. This is possible through risk hedging.
If you want to dabble in the world of crypto options, first you need to learn what they are and then start trading.
Understanding Cryptocurrency Options
When looking at traditional financing, 2 option types exist and can be bought. These are “put” and “call”. The call crypto option offers you the possibility to buy a crypto asset at a strike price. The put option offers holders the possibility to sell assets at predetermined prices.
Options stand out as one of the really important tools available on the market at the moment in the traditional market. It is often used by the traders for speculation purposes. Using the option contract for trading can exceed underlying asset volumes, like in stocks. There are also numerous options that are utilized in order to hedge the risks for the participants that have a really large investment budget.
The crypto market quickly adopted the possibility of using options. However, the demand for crypto options is lower right now, especially when compared with stocks. This is mainly due to the BTC/USD trading volumes that can easily decline.
To put it as simple as possible, crypto options are contracts or financial instruments that offer you the right to sell or buy a specific cryptocurrency for a price that is predetermined, all at a future given date. Cryptocurrency options can so easily intimate the new market participants due to the use of terminology that is idiosyncratic. It is simply different from the legacy options market and the terminology that is used there, even if it is already quite complicated.
When referring to cryptocurrency, the “upside profits” options contract is very similar to the call option in Europe, a right to buy. The “downside profits” options contract is just like the put option, a right to sell.
Where Can Crypto Options Be Traded?
Crypto options are normally designated between cash-settled and bitcoin-settled markets. The most popular market at the moment is Bitmex but Okcoin and Okex are very popular alternatives.
When referring to the cash-settled crypto options, CME (Chicago Mercantile Exchange) enjoys a very high popularity. Its alternative is the CBOE (Chicago Board Options Exchange).
On the whole, there are countless crypto option opportunities that are being developed and that will be available soon for interested investors. Usually, working with someone that has experience in the industry is what counts since the crypto market is highly volatile. Options can easily go up and down much faster than initially expected.
In the future, traders will be faced with a growing crypto market capitalization and various derivatives that are going to be developed. This does include cryptocurrency options. Traders will have much more power to sell and buy bitcoin in the way they want.
The last thing that needs to be said is that it is really important to choose a really good platform in the event that you want to invest in crypto options. There are always advantages and disadvantages of trading and you need to be aware of both.
Take as much time as you need to understand everything associated with crypto options and crypto trading in general. The possibility of making a lot of money in a short period of time draws many to cryptocurrency deals but this is a recipe for disaster if you do not know what you are doing.