Things To Consider Before Making A Bitcoin Option Chain Investment
The world of investment runs on one fuel only, profits. This is why investors are looking for methods to make more profits without putting in major risks. Options trading is gaining a lot of credibility lately because of how it helps to burn that very fuel of investment. Dating back to the 17th century, Bitcoin options fall under the crypto derivatives class. Unlike the spot market, crypto derivatives allow you to indirectly bet on various cryptocurrencies.
Bitcoin options are a spectacular way of hedging against Bitcoin’s abrupt price movements, profiting from speculations, and generating income. But there is certainly a lot more to learn about what Bitcoin options chain are, and how to do Bitcoin options trading. Without further ado, let’s get into things you should consider before making a Bitcoin option chain investment!
What Is a Bitcoin Options Contract?
Since crypto like BTC are one of the most volatile investment assets, Bitcoin options provide an opportunity for people to still invest in the asset without taking major risks. Options trading offers a chance for the investors to speculate if the asset will show an upward trend or a downward one in the price movement chart.
Bitcoin options chain is a concept that makes it easier for investors to make decisions. In technical terms, Bitcoin options are contracts that give investors the right to buy or sell BTC without obligation at a specific price and date in the future. This means that the investors can bet on Bitcoin’s future price movements as per their intuition and earn profit over speculation.
Bitcoin Options Trading and Its Difference from Conventional Crypto Trading
Conventional crypto trading and options trading is largely different. The traditional method of spot market crypto trading relies solely on buying and selling the assets and then trading them off at a higher price to book profits. On the other hand, buying crypto derivatives like Bitcoin options is preferred over actual trading because it incurs less cost to the investor.
While you trade a Bitcoin option chain, you do not buy the crypto itself and instead trade according to your speculations of its price positions at a fixed point of time in the future. One of the greatest benefits of the Bitcoin option chain is that you even have the choice to put your money over a downtrend in BTC’s price, which is not something you can do in conventional crypto trading. Even the losses are limited to the premium you booked while opening your position in the crypto derivatives market.
Bitcoin Options Trading Strategies
Here are some strategies you can apply when dealing with Bitcoin options:
Hedging
While thinking about earning profits through Bitcoin options, hedging is one of the best strategies to proceed with. Suppose the market suggests that Bitcoin’s value will fall significantly. Bitcoin options provide leverage to the investors to hedge the asset and lock in investment. It means you can select a price for which the Bitcoin you hold can be traded for money before its value washes away.
Price Speculation
Another effective way of earning money through options trading is to invest based on smart price speculations. Suppose you get an intuition after proper research that the underlying low pricing of Bitcoin will soon break. The speculation of price rise can be used to the investor’s advantage, because they have Bitcoin options where they can choose an expiration date. Should the speculation prove too, this will serve as a great method to earn imminent profit.
Bitcoin Options: Puts and Calls Explained
Bitcoin Call Options
Bitcoin call options are getting more popular nowadays because of the ease of trading it allows users. It is an agreement where the investor agrees to pay a specific amount of BTC on a specific date. This is similar to creating a contract with a land owner by paying a small fee at first and agreeing to buy the land at a specific date at a specific price. Call Options to provide a chance for the users to put their price speculations to use and earn profit by just paying a small fee at first to lock in the agreement.
Bitcoin Put Options
Put options are usually used by investors who feel their investment will lose value. It is an agreement that allows the owner to sell BTC at a specific price later, even if the asset has fallen in price.
Conclusion
Bitcoin options are becoming popular amongst traders and investors because it provides higher profit earning with lesser risks, especially compared to spot trading of the crypto.
Delta Exchange is India’s most trusted platform for crypto derivatives. On Delta, we bring excellent liquidity, and our options book has the tightest spread in the industry! What’s more, we even provide up to 100x leverage for you to have a great experience trading in crypto derivatives!
We wish you good luck in your Bitcoin option chain investment!
