Feeling bearish and want to profit from a potential fall in asset prices, but getting rekt by a rough market? You may be better off buying Put options than short selling.
Don’t get REKT by crypto volatility
Flash spikes and crashes are very common in this volatile crypto market. Overly leveraged traders and investors constantly face the threat of margin calls, premature liquidations, and large uncontrolled losses.
Better risk/reward with Put options
With Put options, you do not have to worry about being forced out of position prematurely. Risk is limited to just the Premium Payable while you still enjoy leveraged returns on your position. Sparrow options, being covered, helps to further protect your positions.
Buying Put vs shorting
Scenario 1: Unfavorable — BTC/USD rises in value by 20%
BTC/USD price at start: $10,000
BTC/USD price at end: $12,000
If you paid $1,000 Premium Payable to buy a 1 BTC Put position at a Strike Price of $10,000 and BTC settles at $12,000, your risk from the trade is capped to the Premium Payable.
In comparison, if you short BTC and BTC settles at $12,000 from $10,000, your loss will be $2,000 and potentially much worse, depending on how much BTC rallies.
Scenario 2: Favorable — BTC/USD falls in value by 20%
BTC/USD price at start: $10,000
BTC/USD price at end: $8,000
Likewise, if BTC settles at $8,000 from your 1 BTC Put position at a Strike Price of $10,000, you will profit $2,000, which is a 200% return on your $1,000 Premium Payable.
This is as compared to shorting BTC at $10,000. When the price reaches $8,000, your profit is still $2,000, which is a mere 20% return from your $10,000 position. You also risk your whole capital by placing this trade, as compared to buying a Put option where your risk is limited to your Premium Payable.
Especially in this volatile crypto market, buying Put options will be your best bet if you want to take advantage of a bearish move.
Learn more about how you can profit from options in any market conditions:
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