BitOffer Institution: What Is Bitcoin Options?
Welcome to the first chapter of BitOffer Institution! In this chapter, we are going to instruct what is Bitcoin Options. Recently, more and more cryptocurrency exchanges have launched Bitcoin Options. However, to most investors, they have no idea about Bitcoin Options and even Bitcoin Futures. Without knowing the rules, it is nearly impossible for us to win the game.
Educating investors is necessary for every investment market. A few days ago, on the International Derivatives Forum, Ian Nissen, APAC Head of Futures, Clearing and Collateral in Citi, mentioned:” Volatility is noticed by public again while the issue of using options trading to complete the risk management are valued.”. Besides, the technology is following up with the changes in the market while more and more new technologies are put into the Options trading market. Continuous education to investors is crucial to the development of the Options trading market.
The bitcoin Derivatives market has developed rapidly, but most investors still have not understood how to use Options trading. The answers to” What is Bitcoin Options” and “How to Trade Bitcoin Options” are as follows.
What is Bitcoin Options?
Options is essentially a kind of rights that enables the holder to buy or sells an asset at a fixed price at a specific date (or before the date). Just like the futures trading is a hedging tool for spot trading, so is options trading.
For example, when you plan to buy a house, dealers always offer discounts when you pay a deposit first. After then, when the value of the house drops sharply, you can choose not to buy the house, and your largest loss is the deposit. On the contrary, if the value of the house increases, then you would earn the price spread as profits. This is how options works and the deposit is the premium of the Options trading.
How to Trade Bitcoin Options?
In some ways, Trading Bitcoin Options is similar to trading bitcoins on the spot trading market. Both needs investors to predict the bitcoin price in the future, but Options trading supports investor to long or short bitcoins: Buy call when you expect the bitcoin price to be bullish, but put when you expect the bitcoin price to be bearish. If investors buy call, investors would earn the price spread as profits when the bitcoin price rises; If investors buy put, investors would earn the price spread as profits when the bitcoin price drops. In short, investors will be able to earn a huge profit with a small budget in this way.
Take BitOffer Bitcoin Options as an example, it requires 0 fees, 0 margins. The most significant feature of BitOffer Bitcoin Options is its unlimited profit with limited risk. Whether the bull or bear market, investors are able to earn profits up to 1,000X. With the purpose of providing investors a precise hedge tool and an additional trading product, BitOffer Bitcoin Options is also the only Bitcoin Options that does not request investors to exercise the options contract when the contracts settled.
Now BitOffer Bitcoin Options supports 7 different time lengths for investors to choose: 7-days, 1-day, 12-hours, 4-hours, 1-hour, 5-mins, 2-mins.
1. Call Options:
For example, the bitcoin price now is $9,000, you predict that the bitcoin price will probably rise in a week, then you buy a 7-days call options contract with $200. After a week, the bitcoin price rises by $2,000 (from $9,000 to $11,000), when your 7-days call options contract settled, you will earn $2,000-$200=$1,800 as a net profit, of which rate of return reaches 900%.
2. Put Options
For example, the bitcoin price now is $10,000, you predict that the bitcoin price will probably drop in a week, then you buy a 7-days put options contract with $200. After a week, the bitcoin price drops by $2,000 (from $10,000 to $8,000), when your 7-days put options contract settled, you will earn $2,000-$200=$1,800 as a net profit, of which rate of return reaches 900%.
If the direction of the contract you buy is wrong, you would lose the premium you pay to buy the options contract. Therefore, we can conclude that Bitcoin Options is a trading with unlimited profit but limited risk. In other words, Bitcoin Options requires a low budget but allows investors to earn a high profit with low risk. Thus, compared with Bitcoin Futures, without the risk of liquidation, Bitcoin Options is much more acceptable for most investors.