I wish someone would make a youtube video and walk through everything on how to trade on coinut. It's a little confusing for a first time options trader.
I have lots of questions if anyone is bored on a Friday night and wants to answer them
1. Why does my floating P/L swing so dramatically?
2. Why is the P/L showing negative, when the price is going down and I placed a PUT order?
3. If Call is for a long position and Put is for a short position why are the sell buttons? Shouldn't they all be buy buttons, or just Call vs Put buttons?
4. Do you have to wait for the expiration time to occur or can close it out early? Is that what the sell buttons are for?
5. If I bought a contract for 0.003 but my P&L is -0.0034 will I lose additional funds on top of the cost I already paid to place the position?
So floating P/L is based on doing a market order. So it takes into account spread. You'd get a negative P/L because if you bought and then market sold you'd lose money.
I'm not sure if you're doing vanilla options. As mentioned you can get negative P/L because of the spread. But for vanilla options you can get negative P/L on PUTs because of time decay. When you buy a PUT there's a premium, the premium decreases as you near settlement. You paid for the premium and now its less which might be more negative P/L. There's a similar thing with binary options. If it moves a lot (high volatility), in the money options will be cheaper. This might be a bit too complex, ask me if you have more questions.
3. For binary options there's a slight difference being a call binary options pays >= strike, and a PUT binary options pays for <= strike. So if it's on the strike then both the CALL and the PUT get paid out. That's why it's slightly different when you sell a PUT and buy a CALL, or sell a CALL and buy a PUT.
3. For vanilla options Selling and buying is really different. When you buy an option (CALL or PUT), your risk is limited. You can only lose as much as the premium you paid for the position. Your upside potential on the other hand is unlimited (sort of). When you buy an option it'll tell you based on the premium where your break even price is. That's why vanilla options are called non-linear products unlike futures. Futures and spot trading your profit/loss is linear. With options it's a bit different since risk is capped. One more thing, this is why buying options is called Longing volatility. You pay the premium, you're betting that the price will out of the range so you make money on the premium, you could also say its like buying insurance, in case the price moves that much.
3. Likewise, when you sell options, you're shorting volatility. You get to collect a premium. But if it's extra volatile, and the price moves enough in the wrong direction, you're going to lose the premium and lose money. If it stays flat or moves in the other direction, you're going to make money. When Selling options your profit is capped to the premium, and your risk is unlimited.
So I hope you can understand how Buying and Selling Vanilla options is quite different.
4. You do not need to wait until expiration. You can do two things, you can make another trade to hedge your position. When you do this you have to pay a fee. The other option is to click the close button. When you close a position like this you don't need to pay a fee again. If your option is well in the money, it may be better to hedge.
Let's say you have a 228 binary CALL option. You want to take profit, you can sell it for 0.009 but instead you could also sell a 230 CALL option also for 0.009. So now you're hedged into settlement. Except there's the case where you make even more money if it settles between 228-230.
5. I'd need more details. When you buy a contract you can't lose more money then you have. But there's also the fee that you paid. Honestly, I don't even look at P/L.
So tell me if you need any more explanations.
To people reading this, you can click the link in my signature to sign up for Coinut.
