Buying Crypto Call Option(Buy Call)

Introduction

What does buying a Call option do?

Buying a Call gives you the right to buy the underlying asset at your Strike Price on your Settlement Date

Why would I buy a Call option?

You believe the price of the underlying asset (Settlement Price) on the Settlement Date would be greater than your Breakeven Price

How do I calculate my Breakeven Price?

Breakeven Price [Call option] = [Strike Price] + [Premium Payable]

E.g. Buying a Call option with Strike = $10,000 will require you a Premium Payable of $200 ( In BTC equivalent = $200/$10,000 = 0.02 BTC), giving you the right to buy 1 BTC for $10,000 at settlement. Your Breakeven Price would be $10,200.

How do I calculate my profit at Settlement?

Profit = [Settlement Price] — [Breakeven Price]

Loss = Premium Payable

Scenario 1: P&L — If Settlement Price (BTC settles at $12,500) > Strike Price

Profit = Settlement Price — [Breakeven Price = Strike Price + Premium Payable]

= ($12,500 — $10,000 — $200) / $12,500

= 0.184 BTC

Scenario 2: P&L — If Settlement Price (BTC settles at $7,500) ≤ Strike Price

Loss = Premium Payable

= -$200

What is my maximum profit?

Buying a Call option gives you the opportunity to enjoy potentially unlimited upside during a bull market

What is my maximum loss?

Buying a Call option limits your loss to the Premium Payable

Buying a Call option on Sparrow

1. Go to Options > Simplified
2. Click/Tap TradePROTECT Buy [it will turn Green if correctly activated]
3. In the Customization Panel on the right
4. Enter a Strike Price that is greater than the Current Price to set a Call option
5. Enter the Settlement Date and Amount Protected
6. The Premium Payable will be displayed at the bottom
7. Click/Tap Confirm to place the order

 

 

Here’s a scenario

  • You are bullish on BTC and expect it to trade above $11,000 on 27 March 2020
  • You can buy a Call for 1 BTC with Strike Price at $11,000, Settlement Date on 27 March 2020
  • The cost for making this position will be 589.99 SP$ (Premium Payable)

How do I profit?

 

 

 

 

 

 

FAQ

Why are premiums paid in SP$?

SP$, as the settlement token in Sparrow, helps in simplifying and standardising the trade settlement process for greater liquidity despite the customized nature of the contracts. Traders can easily value and make better decisions across Sparrow Option contracts.

 

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DISCLAIMER

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