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Title: Binance/Bybit. Is that possible to hedge a futures contract with PUT option? Post by: stas87 on April 05, 2024, 12:26:14 AM Hi, is that possible to hedge a futures contract with PUT option contract? I mean the type of hedging where the liquidation price of futures contract will be neglected if I purchase a Put option (yeap, I use leverage). Just like a hedge mode in futures trading. Thanks
Title: Re: Binance/Bybit. Is that possible to hedge a futures contract with PUT option? Post by: Oshosondy on April 05, 2024, 07:04:08 AM I mean the type of hedging where the liquidation price of futures contract will be neglected if I purchase a Put option (yeap, I use leverage). I do not really understand you and it would be good if you explain yourself better. Although I do not know much about options trading but I know that if it involves leveraging, that means it involves liquidation. In any trading that a trader uses leverage, liquidation can not be ruled out. Title: Re: Binance/Bybit. Is that possible to hedge a futures contract with PUT option? Post by: crwth on April 05, 2024, 07:14:34 AM Neglecting the liquidation is kinda weird. I am confused about ignoring the liquidation price. When I think of Hedging in futures trading, it's the time when you flip from short to long and vice versa.
Is that what you meant? Title: Re: Binance/Bybit. Is that possible to hedge a futures contract with PUT option? Post by: stas87 on April 05, 2024, 11:13:18 AM Neglecting the liquidation is kinda weird. I am confused about ignoring the liquidation price. When I think of Hedging in futures trading, it's the time when you flip from short to long and vice versa. Is that what you meant? When you switch to hedge mode in futures trading and open 2 position on cross-margin: 1 long and 1 short of the same asset with the same amount, your liquidation price is neglected and is shown as 'None' because you have a fixed profit\loss so you will never be liquidated. I am wondering if I can achieve the same using 1 long position and 1 PUT option. However, I more than sure that they do not have what I want and the only way I can achieve that is to buy a futures contract and a a PUT option with the strike price below my liquidation price, so if liquidation occurs I will execute my option and buy the asset at the lower price and selling it at market price covering my losses minus premium. Yes, it is not what I've meant but I suppose there is no any other implemention options hedging strategy on Binance futures However, Thanks for a response Title: Re: Binance/Bybit. Is that possible to hedge a futures contract with PUT option? Post by: adaseb on April 06, 2024, 04:21:48 AM You can’t really properly hedge this. There will be losses that you will have to accept. Any type of option, especially crypto, during a volatile period has huge decay. You are paying a large premium and the option loses value everyday due to the time decay.
Maybe this would be possible if it was extremely short term and the option was in the money and close to expiry but the spread is high on options and liquidity isn’t always that great. |