Explain crypto options to me
Explain crypto options to me
So I was learning a little about the “world’s largest crypto options, and futures exchange” how they call themselves, and even speed-read their tutorial about options.
I do understand the basics of options trading, but there is one thing I still don’t understand: why options?
“limited risk” can’t be the main reason to trade options. I get that stop losses aren’t the most secure guarantee that your risk is limited, but they do work in most cases.
for “leverage” you don’t need options either.
what is the main advantage of trading options? or would it be the main use case?
someone experienced with them could give me a hint?
It depends on what “limited risk” refers to. Limited risk in comparison to equities can be correct (depending on the market situation), and of course also in comparison to high-risk trading with leverage.
In comparison to standard crypto trading, however, I almost doubt it, as in addition to the exchange fees, there are also fees for the options themselves. So you have to get out much better with the options trades to achieve a comparable profit.
Options are less risky than classic futures in some cases. But if you are the creator of a classic option on regulated exchanges, then you could have a fairly large loss. On cryptocurrency exchanges, options are slightly different from classic ones due to the fact that here users are often anonymous.
But if you do not create options, but only trade them, then your loss is limited only by the cost of your option, that is, the premium. However, often the amount you spend on an option would be more logical to spend on buying a spot asset. Why? Because in the case of a spot asset, complete depreciation never occurs. You can hold a spot asset theoretically indefinitely. The option has a temporary decay and most often you will have a loss on it.
I don’t get what you are trying to point out because you mention futures and leverage and stop loss.
Are you talking about the Binary option? But I never heard of a Binary option that has stopped loss.
If I’m right then the Binary option only has two options up or down and this is very risky because if you lose the total amount you set is fully deducted from your total capital minus the fee if you predicted it wrong that’s totally different from futures or leverage trading because there’s no stop loss in binary option it is likely just yes or no and it is totally a gamble.