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

[vennali]

Options Market is growing like crazy! Its the right time to learn about it and take advantage. 

[MCobian]

If we hold using money that we can afford to lose, it feel safe. Because if the price of bitcoin goes down, it won't panic. We just have
to wait until bitcoin rises again and reaches the target we want. But I admit using the option, we can be more productive when trading.
Because we can manage the maximum amount of loss that we want, that way we can protect trading capital that we have.

[Mrengage]

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

HODLING is great yes we all know that but many lack this: PATIENCE is just recently few of my guys in Crypto are realising. HODLING is not bad as most people who are getting into the Crypto system or who has already been there are condemning it. Is in the Matter of fact that you know what token or coin you are HODLING. Then you build it up with patience and you will succeed.

[slaman29]

Um, because not everybody wants to hedge their bets? People like me bet long term but we are always prepared for things to go suddenly boom!

And yes, we are also prepared for everything to go down badly. But hedging for me isn't going to yet another risky thing to keep an eye on. For me savings and investments are all diversified through different markets. Gold? Bank long-term deposit?

[vennali]

Um, because not everybody wants to hedge their bets? People like me bet long term but we are always prepared for things to go suddenly boom!

And yes, we are also prepared for everything to go down badly. But hedging for me isn't going to yet another risky thing to keep an eye on. For me savings and investments are all diversified through different markets. Gold? Bank long-term deposit?

How are you prepared for everything to go down badly? Can you tell us as well. I feel like Options is a great tool for that. You could try to panic sell/short BTC but its no good for anyone.

[vennali]

Not very sure which way BTC is headed. I think its a pretty good time to trade options and secure your position by buying a put. It will act as an insurance incase BTC goes tumbling down. I feel its a good way to protect your assets.

[BitcoinTurk]

If the purchase is made with option options, yes, the risk and loss potential will be much less. In addition, since all capital is not used for a single investment, it can be used for various transactions. Yes, the time value of your money does not decrease when you buy options, and your loss potential is only the commission paid for the option transaction. For example, if the option is taken from 8,000 USD today, if the price drops to 7,000 USD after 2 days, the loss here will be only the commission fee of the option transaction, not 1,000 USD. Since this fee varies in many services, I cannot write a clear amount, but I can assure you that for every drop that will occur, except for minor decreases, there will be much less than your possible loss.

[Ryker1]

Not very sure which way BTC is headed. I think its a pretty good time to trade options and secure your position by buying a put. It will act as an insurance incase BTC goes tumbling down. I feel its a good way to protect your assets.

Well, that is right. We don't know which way bitcoin headed at but one thing that we know for sure, --bitcoin will be experienced massive down but it will always resist and go up high. I am with HOLDING because I know that it is a great option while you are investing in a long term purpose, we know how bitcoin volatile is but does not matter if there is the law of demand and supply that makes bitcoin price move.
Indeed, that is why I always advise my colleague who has invested bitcoin that invests only in what he can afford to wait in a long term. Because investing in crypto needs a perfect time when you will going to harvest your profit.

[vennali]

Not very sure which way BTC is headed. I think its a pretty good time to trade options and secure your position by buying a put. It will act as an insurance incase BTC goes tumbling down. I feel its a good way to protect your assets.

Well, that is right. We don't know which way bitcoin headed at but one thing that we know for sure, --bitcoin will be experienced massive down but it will always resist and go up high. I am with HOLDING because I know that it is a great option while you are investing in a long term purpose, we know how bitcoin volatile is but does not matter if there is the law of demand and supply that makes bitcoin price move.
Indeed, that is why I always advise my colleague who has invested bitcoin that invests only in what he can afford to wait in a long term. Because investing in crypto needs a perfect time when you will going to harvest your profit.

If you are very bullish. You should look into call options and especially that you are bullish on a long term, may I suggest you buying a long term call? That could do the trick. Sparrow exchange has options for upto 6 months, so you could give it a shot there.  I am bullish on a long term as well so that's what I have been doing personally.

[vennali]

If the purchase is made with option options, yes, the risk and loss potential will be much less. In addition, since all capital is not used for a single investment, it can be used for various transactions. Yes, the time value of your money does not decrease when you buy options, and your loss potential is only the commission paid for the option transaction. For example, if the option is taken from 8,000 USD today, if the price drops to 7,000 USD after 2 days, the loss here will be only the commission fee of the option transaction, not 1,000 USD. Since this fee varies in many services, I cannot write a clear amount, but I can assure you that for every drop that will occur, except for minor decreases, there will be much less than your possible loss.

Thats a good explanation and what I'd like to add is that, the commission that platforms take is marginal when it comes to trades worth 1btc etc. On top of that, on Sparrow exchange, you get 50% off on your trading fees if you use their tokens(SPO) in the platform. So, the already marginal trading fees is even more obsolete.

[Nhor1011]

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.

It's really hard to be entrusted your funds even in a trusted exchange because it might be lost out of your control unlike if it was keep directly in your wallet whatever may happen or if it get hacked you can't blame anyone or the exchange because it was in your own caution.

[bitgolden]

People have been coming here and talking about options and insurance all the time but it is really getting boring.

Yes we get it, yes there are options, yes there are insurance towards our positions. If we wanted it, we already have all the reasons we want to use it and we have already seen it a million times, could we get a break?

I do not use options because I do not trust them, not because I do not agree with the logic, the logic is a seriously good one and it is definitely a good idea, but at the end of the day I do not trust all the places that offer those options, when binance eventually goes there, I can honestly tell you that I will be one of the first in line to do it, but until that day I am way out of this. And please stop promoting all these option places.

[htsy585]

Option is really a nice trading strategy especially for pro traders who whants to up their game against market volatility but most holdlers are not often worried about market volatility and little price dumps as they do go into the trade with a pre-determined price goal of when to sell the token so they don't often care about market volatility 

[GreatArkansas]

Nice thread OP.
But may I know what is/are the disadvantages of using an Options, it's only advantages I read in the first post.

But my idea on the disadvantage of using an Options is trusting your Bitcoins or money to the entity or company that owns that Options.
Because for sure, if the company or entity want to run with your money or Bitcoins, they can do it right?

[vennali]

Nice thread OP.
But may I know what is/are the disadvantages of using an Options, it's only advantages I read in the first post.

But my idea on the disadvantage of using an Options is trusting your Bitcoins or money to the entity or company that owns that Options.
Because for sure, if the company or entity want to run with your money or Bitcoins, they can do it right?

People have been coming here and talking about options and insurance all the time but it is really getting boring.

Yes we get it, yes there are options, yes there are insurance towards our positions. If we wanted it, we already have all the reasons we want to use it and we have already seen it a million times, could we get a break?

I do not use options because I do not trust them, not because I do not agree with the logic, the logic is a seriously good one and it is definitely a good idea, but at the end of the day I do not trust all the places that offer those options, when binance eventually goes there, I can honestly tell you that I will be one of the first in line to do it, but until that day I am way out of this. And please stop promoting all these option places.

I see that your main concern is the platform running away with your Crypto. Well, all I can say in this regard is that Sparrow does not hold any of the crypto that you have deposited into your accounts. Sparrow is partnered with Bitgo who take custody of the crypto deposited on the platform and none of them are stored with Sparrow. Bitgo is worlds leader in digital custodial service who also provide services for known entities such as Bitstamp, BitBay, SBI Holdings, Ripple, Nexo to name a few. You can read about it in the blog post. Another concern you may have is the platform manipulating with your trades for their benefit. That simply isnt possible as Sparrow works on a blokchain called Nidus Explorerthrough which you can verify your transation. Sparrow is located in Singapore, which is a crypto friendly country and that brings in regulations as well. If you have any more questions. Please feel free to ask. I can understand why someone could be apprehensive about a new kid on the block.

Perhaps many simply do not understand how to do this.

Thats the reason for the post. To help people understand at least a small portion of it.

[Wind_FURY]

OP, I believe options for hedging doesn't apply on Bitcoiners' HODLing philosophy. Marketing it "good for HODLers" might not be the best path. For Bitcoiners, HODLing itself/managing your own keys/actual control on your own money IS the hedge.

[nelson4lov]

Nice thread OP.
But may I know what is/are the disadvantages of using an Options, it's only advantages I read in the first post.

My question too. OP only sugar-coated it. The way he described it. Of course there are disadvantages too as options is just like everything else in investing. there is a time value in that even if the underlying share price is stable, the options price decreases over time as the expiry date approaches. This is called a "time decay".   It's possible to lose even 100% of the investment even if the underlying asset "bitcoin" does well. Like other markets, someone losses money while another gains.

[vennali]

OP, I believe options for hedging doesn't apply on Bitcoiners' HODLing philosophy. Marketing it "good for HODLers" might not be the best path. For Bitcoiners, HODLing itself/managing your own keys/actual control on your own money IS the hedge.

Well, Im just providing an alternative for a safer trading etiquette. I don't think there is any trader who would disagree that hedging your trades is a good idea. It could be your philosophy that owning BTC is the hedge while comparing it to fiat. That doesn't always have to be the case when we look at it intrinsically and focus on Bitcoin and its volatility. Also, I will also agree that managing your own keys is great and I do that as well but when you have to trade, you sort of lose that aspect. Anyways, in the idea that I provided in my OP. You dont have to put a lot of funds to insure your coins. It will be fractional when compared to your stack you HODL. Also, if it helps, Sparrow Exchange uses 3rd party service for storing crypto, who are world leader in digital custodial service and your trades are put on blockchain for others to see.

Nice thread OP.
But may I know what is/are the disadvantages of using an Options, it's only advantages I read in the first post.

My question too. OP only sugar-coated it. The way he described it. Of course there are disadvantages too as options is just like everything else in investing. there is a time value in that even if the underlying share price is stable, the options price decreases over time as the expiry date approaches. This is called a "time decay".   It's possible to lose even 100% of the investment even if the underlying asset "bitcoin" does well. Like other markets, someone losses money while another gains.

Sure, Ill list a few and try to explain them as much as I can
Options expose sellers to unlimited/amplified losses.
Unlike an option buyer, the option seller can incur losses much greater than the price of the contract. Remember, when an investor writes a put or call, he or she is obligated to buy or sell shares at a specified price within the contract’s time frame, even if the price is unfavorable (and there’s no cap on how high a stock price can rise). There are limits, but it could eat away all of your funds you've invested with.

There’s limited time for the investing thesis to bear out.
The very nature of options is short term. Options investors are looking to capitalize on a near-term price movement, which must take place within days, weeks or months for the trade/contract to pay off. That requires making two correct assumptions: picking the right time to buy the option contract, and deciding exactly when to exercise, sell or walk away before the option expires. HODLers aren’t on a deadline. They have time — years, even decades — to let their investing theses play out.

Complexity with advanced strategies and reading the market.
Options trading could become as complex as rocket science when you go deeper into it. Sparrow Exchange does help keeping it simple for anyone to start trading but if you want to trade like a pro you need to spend a lot of time understand the charts, understanding complex strategies to maximize potential profits. Which a lot of us aren't ready to get into for various reasons or just time constraint. You could just make a few trades depending on your sentiment of the crypto market for a long duration like 6months like sparrow provides. Could be useful especially if you are a HODLer.
source for the disadvantages (if you want to read more about risks and benefits)

[LUCKMCFLY]

This works like having an investment in Bitcoin but risking suppose $ 200, this is how I understand it, but how to do when volatility can currently work for or against us? If we choose the option to risk the $ 200 and it is lost, how to recover that $ 200? risking another $ 200 or do you have another particular strategy?

[vennali]

This works like having an investment in Bitcoin but risking suppose $ 200, this is how I understand it, but how to do when volatility can currently work for or against us? If we choose the option to risk the $ 200 and it is lost, how to recover that $ 200? risking another $ 200 or do you have another particular strategy?

There are a lot of strategies when it comes to options and a lot of the very complex. Strategies can only work based on your insight into the market or your sentiments. Its very likely a gamble (HODLing is a gamble too). you could straddle if you think the market is volatile and figure out a way to maximize your profits if BTC goes up while limiting your losses if things do turn south. If you need help figuring out a strategy suitable for your sentiment. Please let me know. I'll try to figure out what could potentially suit best for you. You could also join Sparrow's telegram channel and discuss with us about it(it would definitely be easier. You might even get some expert advice from pro traders and even the CEO of the company. Its a helpful community that we've built. Feel free to ask us your doubts about Options trading and strategies if you want to learn more about them. (Link is in my signature). You don't have to sign up to the website if you don't want to. We welcome everybody with open arms and happy to help with your questions regarding the platform or Options trading in general.