Cryptocurrency has been a hot topic of discussion for years now. It has captured the attention of both investors and non-investors alike. Still, it can be difficult to understand what it is and how you can participate in this game-changing technology. For the uninitiated, there are several ways to get involved with cryptocurrency: mining, trading on an exchange like FTX, or even just buying some Bitcoin and holding onto it for a long time. But if you want to make money off your crypto investments (and we’re not talking about just buying low and selling high), then options trading might be suitable for you.
Options
Crypto options are contracts that give the buyer the right to buy or sell an underlying asset at a specific price. The buyer pays a premium for this right while the seller receives it. If the buyer exercises their option, they buy or sell the underlying asset at the agreed price. Crypto options can be traded on cryptocurrency exchanges such as FTX, which offers advanced traders competitively low fees for transactions and crypto trading options, futures, and leveraged tokens.
Futures
In the context of cryptocurrencies, a futures contract is an agreement to buy or sell an asset at a specified price on a specified date. It’s similar to how stock options work, except with futures, you’re trading the underlying assets themselves instead of just derivatives based on them. Futures are traded on exchanges that offer this functionality to advances traders.
The price of futures is determined by supply and demand—just like any other type of financial instrument. If there’s more demand than supply (i.e., people want to buy more than they want to sell), then prices will rise; if there’s more supply than demand (i.e., people want to sell more than they want to buy), then prices will fall. The opposite can happen, too, if there’s less supply than demand. If the market moves against your position, you could lose your investment, but if you have faith the token will increase, it may be worth taking the risk.
Perpetual Swaps
A perpetual swap is another type of crypto options trading. It is one of the most popular derivatives, and its main feature is that it has a fixed maturity date. A perpetual swap can be used for hedging or speculation. The investor will have their money locked in until the maturity date, but by entering this contract, they get long or short exposure to the underlying asset (the digital currency). This means that if the value increases, then you’ll make money from your investment. If it decreases, you won’t lose money, though you will lose whatever initial fees you put into this position.
Leveraged Trading
Leveraged trading is a way to trade commodities, securities, and other financial instruments by borrowing money from your broker to buy more of them than you could usually afford. This allows you to make more money on small price movements than the amount of your actual investment would allow.
Leveraged trading can be hazardous because it amplifies any gains and losses. If you want to use leverage, then be sure that you understand the risks involved and that they are appropriate for your situation based on your experience level and appetite for risk. To trade using leverage, you will need first to find a crypto exchange that offers leveraged trading and has a strong liquidity engine behind it to get you out of unsalvageable positions and protect the rest of the exchange.
Know Your Risk
The secret to successful crypto options trading is understanding what you’re doing and whether or not you have a high-risk tolerance. As a general rule, options trading can be complicated for beginners due to its complex nature. However, it’s worth considering if you want to take advantage of the volatility in the market without actually buying any cryptocurrency outright.
You can trade on the price of BTC USD or ETH USD with crypto options trading just as easily as other cryptocurrencies such as Litecoin and Monero. This can be beneficial because it allows investors unfamiliar with these coins an opportunity to make money off them immediately without having to learn everything about them first—they just need to know how options work!
Crypto options trading is a great way to diversify your portfolio and grow your crypto assets. It’s also an excellent way to protect yourself against downside risk, which is why it’s so popular with traders just starting out. But as we discussed earlier, it isn’t for everyone—you need to understand what you’re doing and have the right risk-reward profile before diving into this type of investing.