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?
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.