HODLing is great but why not use Options to insure what you are HODLing?

[vennali]

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.

Source: Sparrow Exchange Blog

[mk4]

You could say the same with having a stop-loss order on an exchange.

But look. I somewhat get your point, but with some Bitcoiners here on Bitcointalk(or probably most?), we're not only here for the money. We're here for more than that, A LOT more than that. We believe in self sovereignty, and having total control over our money, which Bitcoin gives us hence why we hold them on non-custodial wallets and not on exchanges.

^And that's just the tip of the iceberg. Don't get me started into furiously ranting about governments and central banks.

[rexxarofmoknathal]

Options are quite an advanced trading product, most of the people here on the forum are complete pleb noobs that have no idea how to trade and yet come on here and try to spout their "wisdom" and "secrets".

Very few of them even have a substantial portfolio worth protecting, so they're highly unlikely to look to options to hedge their risks.

[enhu]

Most trader are using the USDT to hedge and nothing else. 200USD still is a loss but hedging USDT while they know when the price of BTC is going to drop thru reading the charts they may not lose 200. For holders, they don't care as long as their BTC stays the same while the price sinks, all they would so is wait since they put their trust to BTC.

[vennali]

You could say the same with having a stop-loss order on an exchange.

But look. I somewhat get your point, but with some Bitcoiners here on Bitcointalk(or probably most?), we're not only here for the money. We're here for more than that, A LOT more than that. We believe in self sovereignty, and having total control over our money, which Bitcoin gives us hence why we hold them on non-custodial wallets and not on exchanges.

^And that's just the tip of the iceberg. Don't get me started into furiously ranting about governments and central banks.

I completely understand what you are trying to say and I do the same. Most of my BTC is on my Ledger Nano but I use a small portion of my stash to enhance my HODLings. Like straddle so that even if BTC goes down, I still recover my losses with put Options. There has always been a trend of BTC price deteriorating right after halving so, it was a good time to buy some puts. You never know which direction BTC is gonna go so better to be safe than sorry.

Options are quite an advanced trading product, most of the people here on the forum are complete pleb noobs that have no idea how to trade and yet come on here and try to spout their "wisdom" and "secrets".

Very few of them even have a substantial portfolio worth protecting, so they're highly unlikely to look to options to hedge their risks.

Which is the motive for this post. Hopefully I can help someone learn a thing or two about trading Options and how one can utilize it to their advantage. On the base level, it isnt very hard to understand but Options does get very complex like rocket science. You dont really have to go very deep to be able to utilize it though but a word of caution needs to be thrown when it comes to using it as a money making tool.

Most trader are using the USDT to hedge and nothing else. 200USD still is a loss but hedging USDT while they know when the price of BTC is going to drop thru reading the charts they may not lose 200. For holders, they don't care as long as their BTC stays the same while the price sinks, all they would so is wait since they put their trust to BTC.

What you are trying to do is "short" BTC when you see other people panic sell. Hopefully you do it in time, but you never know. Shorting is a dangerous game. Anyways, HODLing all your funds in exchanges is a very bad idea. There are tons of examples you can find if you look at the history of Bitcoin exchanges. Simply HODLing in a hardware wallet is fine too but why not insure your BTC incase of a rainy day? save yourself from a potential crash and sleep peacefully. 
 

[davis196]

So you are suggesting that we should deposit our coins in some cryptocurrency exchange that supports option trading and buy put options?What if there's no trusted exchange that supports options trading and the ones that do support option trading are scams?HODLing is the best possible strategy for the newbies,because they are keeping their coins in their own wallets and not relying on the mercy of some shady crypto trading platform,that might run away with their coins.

[Kelvinid]

It is a big help for holders to keep safe their assets in this volatile market but wondering if all reputable exchanges have that OPTION button because usually, I found is only a stop-loss option. I don't think that noobs will find that impressive or even not use this option.

For it knows that some holders aren't thinking that way but just a simple holder who waits for the market to rise and then sell. I hold some bitcoins but I'd never had that strategy because even we use it but still we can be lost. And I don't think we need it if we always tracking out holding every day.

[Assface16678]

Today there are a lot of people making an investment to buy a lot of coins when the market price reaches the dip and they are now keeping hodling because they know the passive income but still, even in holding there is a risk sometimes there are unexpected actions on the market movement and this may cause a lot of damage to your investment which takes a lot of additional time again before you make pull out or withdrawal to your funds. Still, we can set the limit to avoid this kind of action because by setting the limitation you can make already profit and pull it out but sometimes getting greedy makes it more difficult for us to stop market profit.

So you are suggesting that we should deposit our coins in some cryptocurrency exchange that supports option trading and buy put options?What if there's no trusted exchange that supports options trading and the ones that do support option trading are scams?HODLing is the best possible strategy for the newbies,because they are keeping their coins in their own wallets and not relying on the mercy of some shady crypto trading platform,that might run away with their coins.

I'm not highly recommended too making an investment and hold it to their exchanges because it is quite risky you cannot tell until when that they are operating it is better to find some wallet to make sure our funds are safe and secure it is better to be careful and aware than to lose a huge amount of money.  If you will use an exchange just use to trade your coins but not hold your coins there.

[sheenshane]

Crypto HODLERs are already used to the hedging though the options might be a good trading strategy that may secure traders' Bitcoins and their crypto assets. Hodlers probably not be able to adopt this right away or will intend not to but for me, I really appreciate this as a small traders. I'm afraid of losing the Bitcoin that I have but I know at the same time that in trading I must take the risk to earn profit and this option will at least save some of my bitcoin if an unavoidable situation arises in the market.

However, when traders start to use this option and will post their testimonies that it is really advantageous to use this option when trading then many of the rest will follow this strategy.

[carter34]

HODLing is the best possible strategy for the newbies,because they are keeping their coins in their own wallets and not relying on the mercy of some shady crypto trading platform,that might run away with their coins.

I fear for such too that time you don't have a trusted exchange, is risky. I like I buy my choice coin and then direct to my wallet. A wallet that I'm the one with the security. As for exchange address, you can even get hacked out and your coin gone. I'm cool with having my coin myself.

[maydna]

I heard about Option on another trading form, but I forget what the name is. It is easy to try to use Options if we know about that, but for people who don't have much skill in trading, mostly about how to use Options with the right, that will be too risky. Instead of making a profit, they can lose their money by applying something that they don't know with good, so I think Holding will be the best options for them.

But if they can learn about Options, and they willing to accept the risk behind Options, then that will be their way to try to make a profit while they can reduce the risk of fluctuating of the bitcoin price. Perhaps, we need more lesson about Options so we can know more details, and we can practice using Options itself. But now, I still prefer to trade by manual, but I think I will search for more information about Options Trading.

[The Cryptovator]

Sound is like stop-loss, and I think option trading and stop-loss is same. But fortunetly you will have to exchange if you like to set option or stop-loss. The problem is most of hodlers do not like to hold their assets on the exchange due to low security. On the other hand, long terms hodler do not care about small volatility since their intention to hold for future. Whatever you wrote looks time short time trade to be honest. Also you can't say you are fully secure by set option, because sometimes we have encounter price has pumped after touch set option/stop-loss. So if this happen then you will be loser by the way. So for long term hodlers it's not much important to set stop-loss or set option. That's why they are HODLER, not a traders.

[el kaka22]

I would say instead of going all this trouble, all you can do is not risk all of your money into leverages and so forth and simply just save.

If you save bitcoin and put it on freebitco.in you could basically gain 4% interest rate on your bitcoin as well (in bitcoin form of course) and all you would be doing is work hard, earn money, put some of it aside as bitcoin and gain interest and in 30 years you will retire very rich and you will leave something to your kid that they would basically live better than you did, if your kid does the same but in bigger amount they will lea... that is a dynasty family right there.

If that is so easy why can't people do it? Because, there are way too many unexpected expenses in the world that comes up all the time (literally like right now and pandemic) that causes us to empty the piggy bank.

[khaled0111]

I am not too familiar with options trading and don't understand how it really works but isn't this strategy (hedging), you explained here, going to reduce the risks for short term investments only?! Am a little bit skeptical, but is there any analyses which proves that this strategy will work with long term investments?

Anyway, I think all long term holders are true bitcoin believers and don't really care about losses otherwise (imo) they are just traders not holders.

[shield132]

You could say the same with having a stop-loss order on an exchange.

But look. I somewhat get your point, but with some Bitcoiners here on Bitcointalk(or probably most?), we're not only here for the money. We're here for more than that, A LOT more than that. We believe in self sovereignty, and having total control over our money, which Bitcoin gives us hence why we hold them on non-custodial wallets and not on exchanges.

^And that's just the tip of the iceberg. Don't get me started into furiously ranting about governments and central banks.

Bitcoin turned into commercial business right now because businessman took their hands on it and when it happens, things get abused.
A lot of "bitcoin supporters" hodl bitcoin but is that right behavior? When you freeze money in your pocket in order to wait for futher price rise, when you stop circulation of money, I think that's not right. Holding only stops things from progress while circulation increases it's ability of massive spread. I know it may sounds hard to understand what I said but hope you understood what was the point there.
And my post isn't intended to start talking about central banks and etc, just about "bitcoin holders".

[gentlemand]

I had a fiddle with options on stock markets. I knew nothing but bought a load anyway and doubled my money. Nice. Never did it again.

Unlike normal leverage, options might be something I'd consider for BTC if I fancied some price speculation, but for many it's all about the platform and there's nothing of note offering them yet.

[hulla]

I am not too familiar with options trading and don't understand how it really works but isn't this strategy (hedging), you explained here, going to reduce the risks for short term investments only?! Am a little bit skeptical, but is there any analyses which proves that this strategy will work with long term investments?

Not fimiliar either but after thorough reading about the OP offer, i somehow understand how the whole thing works. It a process where people will have to pay the company some fund base on the amount of crypto they want to insure other to reduce/protect their coins during market fluctuations but you still can be sure how secure your coin will be because nothing was said about the fund wallet private keys.

Anyway, I think all long term holders are true bitcoin believers and don't really care about losses otherwise (imo) they are just traders not holders.

Yes, it not always about money but the legacy, understanding and affection cause the price of the market will later appreciate.

[yarlungzangbo]

I think using options to insure our hodling is the best idea, i already did this too.

So many people don't understand why this strategy have to lose some money(insure fee), but they didn't realize that the volatility is the way where their profit goes from...

[Latviand]

You could say the same with having a stop-loss order on an exchange.

But look. I somewhat get your point, but with some Bitcoiners here on Bitcointalk(or probably most?), we're not only here for the money. We're here for more than that, A LOT more than that. We believe in self sovereignty, and having total control over our money, which Bitcoin gives us hence why we hold them on non-custodial wallets and not on exchanges.

^And that's just the tip of the iceberg. Don't get me started into furiously ranting about governments and central banks.

Just chill, you got a point. We're not here for money, we are here for the better future of using cryptocurrency and for the benefit of us all. We should help each other and contribute to the promotion of cryptocurrency. But that's not my main point, we're here to learn more about the advantages of bitcoin in the market, we're here to learn how to manipulate our assets and money properly.

We're not here to get rich, being rich is just the effect of proper manipulation of your assets. Sometimes we just really need to understand and hodl depending on the situation in the market. When we hold, we really need to increase our safety and security about wallets, there are a lot of options, yes, but we need to think more of the possibilities that may occur.

Hodling is really essential when you want to maintain your assets during downward movement in bitcoin's price, patience and self-discipline is really crucial here in cryptocurrency that's why you need to practice it. Just like controlling your emotions and controlling your money. Just like that.

[vennali]

I am not too familiar with options trading and don't understand how it really works but isn't this strategy (hedging), you explained here, going to reduce the risks for short term investments only?! Am a little bit skeptical, but is there any analyses which proves that this strategy will work with long term investments?

Anyway, I think all long term holders are true bitcoin believers and don't really care about losses otherwise (imo) they are just traders not holders.

Not just short term, there are options available for 6 months as well. So, if you are bullish on long term, you could sell calls for 6 months and enjoy returns without risking much while compared to just hodling. If you HODL a lot of coins and you are happy with the current position but are afraid of BTC volatility. You could buy puts for the amount. The premium payable (paid upfront) would be negligible when compared to the amount of BTC you are holding(which could be held by you on your private wallet and not exchange so it is extra secure). If the BTC does crash in the future(I hope not), you will recover whatever the value youve lost. It basically works like an insurance and instead of paying repeatedly you just pay once at the start and relax for the duration youve opted.