More retail traders have started to experiment with crypto options, causing it to rise in popularity 🚀 In today’s article, CMC Academy dives into the basics of options and explains its types. 👇
. However, the market for altcoin options is growing as well. Some traders use these options to speculate on the direction and volatility of these assets, while others use them as a hedging instrument. Contrary to most other instruments, options can provide good trading opportunities even if the market is not making wild swings.
If Ethereum moves to 1,800 before next week, she might decide to close the position before expiry. The option will be worth at least $100, $70 more than what she paid for. In most cases, the option will be worth even more, as people will likely want to speculate on even higher prices, pushing the price of options further.
As you can see, the risk/reward ratio could make buying options a more attractive financial strategy. Of course, there are numerous strategies to make selling options an attractive tool as well, but these are better suited for more experienced options traders. As an example, Fred buys an Ethereum put option with a $1,600 strike for next week, at a premium of $110. In other words, he pays $110 for the right to sell Ethereum for 1,600 dollars, next week.
This brings us to some of the popular terms linked to the options market. You can find those terms at the end of this article.
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