BitOffer Institute: Same as Bitcoin Contracts, Reasons Why Options Never Liquidated.

After getting familiar with Bitcoin, many investors witness fortune legends about Bitcoin futures contracts, and thus imagine they will become one of these fortune legends too. Then, they begin to trade futures contracts confidently with their hard-earned money. However, what they will be faced with are often negative equity balances one by one. At last, they will become new prey in the market. There is a proverb in the futures market: a negative equity balance is bound to come to you, though its arrival may be a little late! High leverage does bring investors considerable returns sometimes. However, it also means high risk. Unfortunately, most investors can just see the high returns it brings but ignores its high risk. That’s why they suffer a great loss or a negative equity balance at the end.

I think everyone knows about futures contracts more or less. Futures contracts are one of the derivative instruments essential to a financial market. Futures contracts have features such as speculation, high volatility, high leverage, and hedging. Most investors blindly trade futures contracts without a full understanding of them. It’s easy to see how high the risk is. Meanwhile, some investors don’t dare to trade futures contracts, because they are very clear about how high the risk of trading futures is though they desire excess returns too.

A kind of contract never resulting in a negative equity balance?

If you really want to trade a Bitcoin contract to gain amplified returns but are unwilling to be faced with a negative equity balance, you can try Bitcoin options. For example, Bitcoin options listed on Bitoffer Exchange are good choices. They require neither margin nor commission, and you don’t need to exercise them! This is a kind of contract with an inherent leverage ratio of 1,000 that never results in a negative equity balance. Although both futures and options are of high leverage, options bring higher returns yet lower risks and never result in a negative equity balance! In comparison, options are more suitable for common investors.

What’s the difference between futures and options?

Futures and options are both common financial derivatives. Then, what’s the difference between them?

Let’s see a simple example.

When you want to buy a house, the developer asks you to pay a deposit first, making you qualified to buy this house at a preferential price. On the agreed date, if the house price decreases, you can choose not to buy it. Then, your maximum loss will be this deposit; but if the house price increases, you can earn the price difference. The contract between you and the developer is called an option, and the deposit is called the option premium.

When you have paid the down payment for this house and finished all mortgage procedures, but this house has not been handed over to you yet, if the house price decreases below your down payment, the bank will take back this house, and in a worse case, you will even owe some money to the bank. This is a negative equity balance. Your down payment is comparable to the margin in your futures account.

This is the difference between futures and options.

What’s the Bitcoin option?

If you trade a Bitcoin option, this means that you predict whether the Bitcoin price rises or falls in the future. In essence, like spot goods trading, Bitcoin option trading allows investors to hold a long position or a short position. To be specific, if you hold a bullish view, you can buy a call option. If you hold a bearish view, you can buy a put option. The profit calculation for options is similar to that for spot goods. If you hold a call option, you will earn the increase in the price within the specified period. If you hold a put option, you will earn the decrease in the price within the specified period. In short, you can bet on the future increase or decrease in the price with a very small sum of principal to earn high returns.

How to trade Bitcoin options?

For example, the price of Bitcoin is now 10,000 dollars. If you think its price will increase within one hour, you can buy a one-hour call option at the cost of 20 USDT. As expected, the price does increase by 1,000 dollars within one hour. After this option expires, the system will carry out automatic settlement, and you will gain a return of 1,000 dollars, 50 times as much as your principal.

If the price decreases within one hour, you will lose your principal of 20 USDT. So, the benefit of the option is “unlimited returns but limited risks”.

I believe all investors have made the choice after seeing the comparison of futures and options. Most investors will choose Bitcoin options, given its high returns, lower risks and impossibility of a negative equity balance.