Super leverage with limited losses, unlimited profits, and never liquidation.

Yes, this is bitcoin options trading.

Recently, the term "options" has become popular. Bakkt launched bitcoin options on December 9, and CME launched bitcoin options on January 13, 2020. These are foreigners who are making troubles and have nothing to do with us, just retail investors The well-known operable options exchanges are Deribit and JEX.

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Go through the process first, the authoritative introduction of options:

Baidu Encyclopedia: Option refers to a contract that originated in the American and European markets in the late eighteenth century. The contract entitles the holder to buy or sell at a fixed price on or before a specific date. A right to an asset.

Wikipedia version: Option (English: Option, or the right to choose) is a right to choose whether to trade or not. When the buyer of the contract pays the premium, if he has the right to buy or sell a certain amount of subject matter from the seller of the contract within a certain period of time (or at a certain time) according to certain conditions or performance prices, this right is Called an option or an option.

Haha, with a confused face, let's take a look at the vernacular version.

Take a chestnut:

1. Call options

"Old Leek" is going to buy a 100-square-meter house to get married, and the market price is 1 million. At this time, "Old Leek"'s mother is seriously ill and needs money urgently, but the real estate market is very hot, and once it skyrockets, he will no longer be able to afford it.

So "Old Leek" found the real estate tycoon "Old Xu" and signed a contract, agreeing that no matter how the house price changes in one year, he can also buy the wedding house with 1 million yuan.

Everything has a price, "Old Xu" will not let you whoring for nothing, "Old Leek" will pay "Old Xu" a contract fee (royalty fee) of 50,000 yuan for this contract (option). Therefore, the power premium (contract fee) is the price of the option (contract).

The contract rules are as follows:

"Old Leek" bought the contract for 50,000 yuan, and "Lao Xu" is obliged to sell the house to "Old Leek" at the price of 1 million yuan stipulated in the contract one year later (delivery period), and "Old Leek" "Have the right to choose to buy or not to buy.

In the end, regardless of whether "Old Leek" exercised the right to buy or not, the contract fee of 50,000 yuan fell into the pocket of "Old Xu".

Two scenarios after one year:

The house price rose sharply, from 1 million to 2 million, and "Old Leek" bought the house for 1 million according to the contract.

The housing price plummeted, from 1 million to 500,000. "Old Leek" chose not to buy, gave up the contract, and went directly to the market to buy a house at the current price.

2. Put options

Assuming that the "old leek" has doubled after buying a house, and realizes the bubble in the real estate market, there may be a sharp drop, but if you sell it directly for 2 million now, and you are worried that it will rise again immediately after selling, you will buy it again Not coming back.

"Old Leek" found "Old Xu" and signed a contract, agreeing that after one year, no matter how the house price changes, he can sell the house to "Old Xu" at a price of 2 million.

Similarly, "Old Leek" has to pay a contract fee (royalty fee) of 100,000 yuan to "Old Xu" for this contract.

Two scenarios after one year:

The housing price plummeted, from 2 million to 1 million, and "Old Leek" was sold to "Old Xu" at a price of 2 million according to the contract.

The housing price rose sharply, from 2 million to 4 million. "Old Leek" gave up the contract and chose not to sell, and went directly to the market to sell the house at the current price.

Did you find out that the so-called options are actually very similar to insurance. Options can protect the market from up and down risks, which is what we call call options and put options. Insurance is more like a put option and only protects against downside risk.

From this example, we find that options are leveraged. Take call options as an example. "Old Leek" directly buys a house with 1 million, and the house price rises to 2 million a year later. %.

If "Old Leek" buys a call option, that is, signed a contract with "Old Xu", and spends 50,000 yuan, and the house price rises to 2 million in the second year, "Old Leek" earns 950,000 (1 million➖50,000 ), which is equivalent to earning 950,000 with 50,000, a 19-fold increase. Moreover, there is no liquidation problem with this leverage. No matter whether it is rising or falling, the price of the "old leek" is only the contract fee of 50,000.

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There are many factors that determine the option price, among which the more important ones are the spot price, the volatility, the remaining time of the option, and various reference indicators. If you want to list all the trading strategies one by one, there are more conservative estimates. Hundreds of thousands of species. Therefore, option trading is more complicated than futures and is more suitable for professional traders, but it is not friendly to most investors.

But after understanding the basic concept of options, we can also use options with some relatively simple strategies.

1. Speculative players

Options can be resold to others, so there are price fluctuations. Before the option expires, you can arbitrage from the fluctuations. To put it simply, if you think that Bitcoin is going to rise, you can buy BTC call options, if you think that Bitcoin is going to fall, you can buy BTC put options, buy low and sell high, and sell before the option expires (before exercise).

2. Lock in future profits

for example:

for example:

The current price of Bitcoin is 50,000, and it is expected that Bitcoin will rise to 100,000 in 6 months. You buy a Bitcoin call option, and it is agreed that you can buy it at a pre-specified price of 50,000 yuan (or other prices) after June. This way you can lock in future bitcoin profits with a small amount of capital.

3. Hedging future risks

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Options have two outstanding advantages, limited risks and unlimited returns. However, this is only a relative concept.

1. The risk is limited, and the number of losses can be unlimited

To buy a few options, the capital investment is really small, and there is no problem of liquidation. For many people, losing more than a dozen times will not hurt their muscles and bones, but what about a hundred times? The risk of buying options is limited, but many people don't realize that the loss of buying options is limited, but the number of trading losses may be unlimited.

2. Unlimited income is only theoretically infinite

Unlimited returns is a relative concept, not an absolute concept. Unlimited benefits are just an exaggerated word, not reality. For example, Bitcoin will return to zero, and Bitcoin will rise to 100 million. Obviously, the probability of this happening is extremely low. Trees will not grow to the sky, and there will not be eighteen levels below the eighteen levels of hell.

Historically, futures and options are the two cornerstones of risk management. They are not tools for speculation. But look at the domestic digital currency futures contract market, how is it different from a casino? Many people don't even know what futures are, so they open 20 times more. Options are more complicated than futures, and whether users can understand them is a problem. Of course, for gamblers, any transaction is as simple as buying and selling.

As top exchanges enter the options market, and all of them have zero entry threshold, it is not difficult to imagine that under the promotion of "limited risks", "unlimited returns", and "super leverage that will never be liquidated", the options market in the currency circle Will become the next super big casino.