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⏰ Time Stamps ⏰
1:23 What are Options?
3:52 Option Theory
6:08 Simple Option Strategies
8:37 Where to Buy Options?
10:06 Building Strategies on Deribit
11:58 Broader Potential For Option Markets
14:44 Future of Crypto Options
⛓️ 🔗 Helpful Links 🔗 ⛓️
► Option Graphing Tool: https://optioncreator.com/
► The Greeks: https://www.investopedia.com/terms/g/greeks.asp
► LedgerX: https://www.ledgerx.com/
► CME Options: https://www.cmegroup.com/cme-group-futures-exchange/options-bitcoin-futures.html
► Bakkt: https://www.bakkt.com/markets
⛓️ 🔗 News Stories 🔗 ⛓️
► 1 Million BTC Options: https://www.bloomberg.com/news/articles/2018-12-06/bitcoin-derivatives-that-cost-1-million-will-soon-be-worthless
► Bakkt Launch: https://medium.com/bakkt-blog/bakkt-bitcoin-options-on-futures-to-launch-december-9-an-industry-first-8fb2bd686abb
► CME Launch: https://www.coindesk.com/cme-takes-its-bitcoin-options-live-competing-with-ices-bakkt
► Long Butterfly: https://www.fidelity.com/learning-center/investment-products/options/options-strategy-guide/long-iron-butterfly-spread
► CME Overtakes Bakkt: https://www.theblockcrypto.com/post/52891/cme-tops-bakkts-reported-bitcoin-options-volumes-in-one-day
► ETH Futures on CME: https://cointelegraph.com/news/ethereum-futures-the-next-big-derivative-to-hit-the-market
► Bitcoin too Volatile at Davos: https://bit.ly/3btF9z5
📝 Simple Overview 📝
Options are instruments that give you the right but not the obligation to buy an asset at some predetermined time in the future. Your loss on this trade is limited only by the option premium or cost of the option.
You can also sell crypto options and doing so will allow you to strucutre some unique trading strategies.
⚙️ Option Theory ⚙️
When it comes to options, there are a number of variables or inputs that impact on its value.
These are the strike price, the spot price, the time to maturity, the underlying implied bitcoin volatility and the risk free rate.
The strike price is the price at which you agree to buy or sell the option in the future. The spot price is the price right now. Time to maturity is how long the option has to go and implied volatiltiy is a measure of how risky the market is.
“Moneyness” is another really important measure of the value of an option.
– In the money is when the spot is above the strike for a call option or if the spot is below the strike for a put option
– Out of the money is when the spot is below the strike for a call option and vice versa for a put
– at the money means the strike equals the spot price
📈️ Option Strategies 📈
A bull spread is a way to take a bullish play on the market but reduce your upfront cost by “selling” away the upside. This can also be a bear spread where you think Bitcoin will fall in price.
You can also buy two ATM options (Call & Put) where you will profit if the price is volatile either way. These could also be out of the money options where you structure what is called a “Strangle”.
If you think that volatility is limited then you can enter a short straddle or strangle. These mean that if the price stays relatively constant, you will get a payoff.
You cal also sell two more options and structure what is called an “iron fly”. These limit your losses in the even of short straddles or they can cheapen a strategy in the event of a long straddle or strangle.
📰️ Current Market 📰
Options have been available on the OTC market for some time. They have also been sold by LedgerX which is the most well known Bitcoin option Swap Dealer.
For traders like you and me, perhaps our best place for us to buy these options is on Deribit. This is a crypto derivatives platform that has been around since 2016.
Bitcoin options are now being offered in listed form on a few exchanges. In December of last year trading began on quarterly Bitcoin options on Bakkt. In January of 2020 the CME announced the launch of their own.
📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.
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