{"id":186394,"date":"2021-02-23T03:30:00","date_gmt":"2021-02-23T00:30:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/heres-how-pro-traders-use-options-to-profit-from-bitcoin-price-corrections\/"},"modified":"2021-02-23T03:30:00","modified_gmt":"2021-02-23T00:30:00","slug":"heres-how-pro-traders-use-options-to-profit-from-bitcoin-price-corrections","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/heres-how-pro-traders-use-options-to-profit-from-bitcoin-price-corrections\/","title":{"rendered":"# Here\u2019s how pro traders use options to profit from Bitcoin price corrections"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3ab84a4b0f8\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3ab84a4b0f8\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-how-pro-traders-use-options-to-profit-from-bitcoin-price-corrections\/#Protective_puts_can_generate_a_profit_on_the_downside\" >Protective puts can generate a profit on the downside<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Here\u2019s how pro traders use options to profit from Bitcoin price corrections <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>Bitcoin seems to be struggling at the $58,000 level, which is leading some traders to fear a more significant correction could take place.<\/p>\n<p>While Bitcoin&#8217;s (BTC)\u00a02021 performance has been incredibly strong, its current 696% gain and comments from United States Treasury Secretary Janet Yellen suggesting that cryptocurrencies are used to finance terrorism may be enough to have investors feeling a bit cautious.<\/p>\n<p>Reducing open position sizes is usually the method most investors use to reduce exposure, but another way to manage risk is to use BTC options contracts to provide protection. Buying a put (sell) option is the easiest way, but it is quite costly considering the current high volatility scenario.<\/p>\n<p>For example, a March 26 put option with a $56,000 strike trades at $5,300, and its holder would only profit if BTC trades below $50,700 in 32 days. That would be 12% below the current $57,500 price. This protection cost depends on the number of days until expiry and the implied volatility, or a traders&#8217; expectation of substantial price swings.<\/p>\n<p>By using call (buy) options and puts (sell), a trader can create strategies to reduce this cost. There are infinite possibilities, but for now, let&#8217;s focus on a low-cost bearish one.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Protective_puts_can_generate_a_profit_on_the_downside\"><\/span>Protective puts can generate a profit on the downside<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>This bearish strategy consists of buying a protective put in order to profit from the downside while simultaneously selling call options at higher strikes. These additional trades will cover the put option&#8217;s cost but will result in losses if BTC surpasses a certain threshold.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-02\/a061fd75-0fff-4e0e-9ba3-d3880510572e.png\"><figcaption style=\"text-align: center;\"><em>Profit \/ Loss estimate. Source: Deribit Position Builder<\/em><\/figcaption><\/figure>\n<p>The above trade consists of buying 1 BTC contract of the March 26 put option with a $56,000 strike, while selling 1 BTC contract of the March 26 call option with a $64,000 strike.<\/p>\n<p>As the estimate above shows, the end result between $56,000 and $64,000 is neutral. The trader would not incur any losses, but would also not profit from the strategy. On the other hand, if BTC drops to $46,000, or by more than 20% from $57,500, the contract holder would profit by $10,200.<\/p>\n<p>In order for the trader to incur a $5,000 loss, BTC would have to reach $69,000 on March 26, which is equivalent to a 20% gain from the current price. Therefore, even though this is a bearish strategy, traders would only incur losses above $64,000, or 11% above the current price level.<\/p>\n<p>This strategy provides a good risk-reward for those seeking downside protection. Moreover, there is zero upfront involved for those trades, except from the margin or collateral deposit requirements.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>autho<\/em><em>r<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/here-s-how-pro-traders-use-options-to-profit-from-bitcoin-price-corrections\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Here\u2019s how pro traders use options to profit from Bitcoin price corrections &#8221; Bitcoin seems to be struggling at the $58,000 level, which is leading some traders to fear a more significant correction could take place. While Bitcoin&#8217;s (BTC)\u00a02021 performance has been incredibly strong, its current 696% gain and comments from United States Treasury&#8230;<\/p>\n","protected":false},"author":1,"featured_media":186395,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDIvNGEwZDYyZjktZjIzZC00YTc2LTlmYTYtNmM5YTlkNTQ5Y2Y5LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,81209,74937,74863,74860,75012,79248,73785],"class_list":["post-186394","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-options","tag-bitcoin-price","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-derivatives","tag-trading101","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/186394","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=186394"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/186394\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/186395"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=186394"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=186394"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=186394"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}