Topic: Insure your Bitcoin with options (Read 583 times)

Futures and options are very similar in terms of "hedging," and just like you pointed out.


I think what you didn't point out is the risk between the two choices that you have "Call" and "Put" Options. It basically has the same risk. but you need to know that there are fees on it when you are holding that particular position.

I still prefer to trade Futures even if it's riskier and has funding fees like in Binance Futures.

Sorry for being noob dude, Can you briefly explain or summarize it in simple explanation about sparrow exchange, what doesn't it means?
am I gonna invest in it then has a similarity of staking? Just not so sure if I am correct to my understanding, but anyway I think this will give me a bit of help to me.

Hedging is a trading strategy to reduce or eliminate the risk of holding one position by taking on another position.

Always getting REKT by the volatile crypto market? You can insure (aka hedge in trading terms) your crypto assets with options trading.

What does this mean?

Hedging is a trading strategy to reduce or eliminate the risk of holding one position by taking on another position.

One simple example is to compare it to insurance, which is basically a form of hedging.

How do options come in?

Options and its trading terminologies may sound complex. However in layman terms, the mechanics behind options trading can be referenced to the insurance industry — where people pay a premium to insure their health. In fact, we could say that insurance providers are simply options sellers!

Here’s an example of how you can use options to insure your BTC.

Example: Insuring your BTC by buying a put option

If you hold 1 BTC you bought at $7,000 and is long term bullish but afraid of short term volatility, you can buy a put option priced at $200 to protect your position against a possible crash.

If BTC nosedived, your maximum loss will be capped at $200.

If BTC dipped to $6,000 on Settlement Date, you will lose $1,000 value from your BTC. However, your put option will have an intrinsic value of $1,000 and can be sold for that amount thus offsetting potential losses and limiting your loss to your Premium Payable.

Summary

Options can be used as an effective hedging tool — as a protection against market volatility for cryptocurrency holders or as part of a wider trading strategy for professional traders.


Read full article with accompanying images here: https://blog.sparrowexchange.com/insure-your-bitcoin-with-options/

 

Interestingly enough what is offered by Sparrow exchange with my Bitcoin insurance for 6 months, when Bitcoin falls then I should be safe.
But I am not yet interested in this Bitcoin options, for me the risk management settings and the use of the stop-loss feature are enough to
make I feel safe. Maybe in the future I can change my mind with a good idea about Bitcoin with options, but now I am still feel safe the way
I trade.

Most people barely have any idea how spot trading works, so why would they then make the jump to options—which are arguably one of the harder financial instruments out there, especially when combined with volatile cryptocurrencies.

If people want to insure themselves against loss, they should learn to use trailing stop losses like expert traders do. Risk mitigation methods like options are only good for those with large sums of bitcoin that are locked up for some time, e.g. miners and hedge funds.

Your right insurance is often an honest idea but we've to take care within the case of trading options often put you in danger However insurance is sweet for long-term trading. It helps us recover BTC after an extended time They pay double profit when the term of the insurance is paid That's why I exploit alternative methods to trade well.

I see that article is very useful. I was bit confused at first about option trading, however the article smoothly explains it.

It’s really good idea to put with premium and insure your big trades. I loved the idea in first place because all you will be loosing is your premium and nothing much and when it will be a winning then it would be way more than that.

Nice idea for those who have big holdings and want to put up for long term holdings.

Yes, Options trading can be utilized like an insurance. You can have a look at this video for better understanding. You could also check out the article the OP is referring to "Insure your Bitcoin with options". It has image that could help understand what its about,, in a slightly better way. 

You are trying to emphasize about option trading which maybe or may not be similar to insurance; but I like to appreciate you for your cross thinking.

In the insurance, I will pay premium regardless of I will be happened to make a claim or not. If there will be no situation for me to make a claim then I will be happy because I stayed secured with the thoughts of I could get chances to recover my losses up to 70% to 90% if anything bad happens. Premium is the fee for having faith on recovering losses.

How exactly option trading works here? If market reacts as per my PUT/CALL then I will get profits if not I will lose. If the risked amount is compared to premium how you will compare the situation with insurance on the event of profitable option trading? I am just trying to think your way but I could not.

Options are not for Noob/newbies. Its extremely hard in my opinion and if you dont have skill in trading or you dont even know how to manage your capital well, stay away from options. Most of options are fast and instantly which you can take a profit in less than 15 minutes. Moreover, there are not many reliable options broker in my country. They are all scammers which change the candle or make your orders disappear without any reasons

I suggest trading with margin/leverage in Binance. This kind of trading is better and you can easily manage the leverage as well as your stop loss/take profit. It can take a little time to learn but its worth after all.

Hedging is a trading strategy to reduce or eliminate the risk of holding one position by taking on another position.

One simple example is to compare it to insurance, which is basically a form of hedging.

I don't understand what the explanation above is, but is it possible that bitcoin can be insured. Do not think about the difficulties that occur to claim when it happens, something that is certainly with evidence. bitcoin is not authentic with a piece of paper that can be used as evidence.

in fact in bitcoin trading all know the risks that will occur and that is absolutely understandable. so just need caution and good analysis to prevent something very harmful. knowing that I think it's a risk, so there is no alternative that can replace it.

For average crypto trader that is here it is better to simply buy/sell than buy/hedge. Why hedge if you can sell?

I am not a fan when it comes to Option trading. I believe it is the worst way of trading and mostly would get you into trouble, so got to be extremely careful with our approach to these things. I am always very careful given I know the impact that it could have.