Feeling bearish? Buy a Put option.
If you think prices will move down, and you want to short the market but worry about forced liquidations or do not want to deploy your full capital, you can still participate in the market movements by buying a Put option.
Why buy Put?
This removes the risk of liquidation (which is why it makes sense to buy Put rather than short the market) while allowing you to enjoy leveraged returns.
- You are bearish on BTC and expect it to trade below $4,000 on 26 June 2020
- You can buy a Put for 1 BTC with Strike Price at $4,000, Settlement Date on 26 June 2020
- The cost for making this position will be 714.33 SP$ (Premium Payable)
How do I profit?
- In order to profit from your buy Put, BTC will have to trade below your Breakeven Price at Settlement Date
- Breakeven Price is calculated as [Strike Price – Premium Payable]
- In this scenario, Breakeven Price will be $3,285.67 (4,000 – 714.33)
- The lower BTC trades below your Breakeven Price at $3,285.67, the greater your profit. Depending on how much BTC dips, your profit could be many times more than your Premium Payable
- However, if BTC trades above $3,285.67, your maximum loss would be 714.33 SP$ (Premium Payable), no matter how high BTC rises
Learn more about how you can profit from options in any market conditions:
- Feeling bullish? Buy a Call option.
- Shorting got you REKT? Try Put options.
- Buying a crypto option contract
- 3 strategies to combat crypto market volatility with options trading
The information provided here is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs.
Sparrow does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.
To the maximum extent permitted by law, Sparrow disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.
Content contained on or made available through any of our communication channels is not intended to and does not constitute legal advice or investment advice and no attorney-client relationship is formed. Your use of the information on any of our communication channels is at your own risk.