How Newbies Can Get Started with Bitcoin BTC Options
When many people first encounter the term "options," they may think of it as "too complex" or "only for professional traders." In reality, once you understand its underlying logic, you'll find it to be a fairly simple tool. Options are essentially a derivative tool, unique in that they allow for the pre-design of profit and loss curves. I summarize the advantages of options with a few key terms.
Flexibility#
The first key term is flexibility. Spot and contract trading are essentially linear yield tools, allowing only for buying up or selling down. However, options are non-linear, capable of handling both long and short directions while also managing risk. The core of options trading is the exchange of "rights" and "obligations," which also involves the factor of "time." For example, if you wish to buy BTC at a price of $115,000 in a month, this "right" can be priced, forming a call option. Conversely, the right to sell BTC at a specific price constitutes a put option. Therefore, options involve four parties in the transaction (the buyers and sellers of calls and puts), allowing for highly flexible strategies, such as holding a spot and buying puts, which is akin to adding insurance to an asset.
Asymmetry#
The second characteristic is asymmetry. The returns on spot and one-time contracts are linear; if the price rises by 10%, the return is also 10%. However, the leverage of options is variable. During a surge in Ethereum, I witnessed a client achieving a 30-fold (3000%) return. If you buy an out-of-the-money option, it resembles a low-cost lottery ticket; if the market fluctuates sharply and hits the strike price, the return could reach ten times, twenty times, or even higher.
Controllable Risk#
The third characteristic is controllable risk. High-leverage contract trading can severely impact sleep quality and even lead to positions disappearing overnight. However, as a buyer of options, the maximum loss is limited to the premium paid, which is akin to a deposit with a clearly defined loss range. As a seller, if you do not engage in excessive naked selling but instead combine it with spot operations, it is closer to hedging, providing stable cash flow returns.
Profit and Loss Plasticity#
The fourth and most attractive characteristic is profit and loss plasticity. Linear products require precise predictions of market direction, but the market often operates in volatility and ambiguity. How can one profit from this? Options traders are like "sly foxes" in the market. In the realm of options, "vaguely correct" can also yield profits. We do not need to predict exact price points; we only need to judge the general direction or range, such as "the price will fluctuate between two points" or "will not reach a high," to profit by constructing strategies.
In summary, the four core characteristics of options are flexibility, asymmetry, controllable risk, and profit and loss plasticity.
In 2024, I primarily operate with Bitcoin (BTC). If trading altcoins, it is extremely difficult to outperform BTC.
I focus on BTC and employ different methods to ultimately achieve fourfold profits in BTC terms. Key strategies include three points:
First, executing large-scale spot swing trades with an annualized return of about 60%.
Second, conducting contract grid trading in a volatile market based on market time cycles, with a monthly return of about 15%.
Third, using options at different stages: as a seller during volatile periods to earn premiums; employing combination strategies to guard against downturns when price points are unclear; and achieving profitability regardless of bear or bull markets.
By combining these three methods, I have achieved enhanced returns in BTC terms.
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