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Options, options, options
Posted by 1 year ago

Starting today you have the option to invest in options....what ?

Options are a widely used financial instrument in the real world. They may be a little difficult to understand at first but they offer you advantages that no other financial instrument offers. Basically an option but the right but not the obligation to buy / sell an asset at a certain price in a predefined time. To have this right, you will have to pay a small fee to the person who issued the option. Let's say the price of ETH is currently $ 160.

One option could give you the right to buy 1 ETH for $ 170 over the next 2 months, for a fixed fee of $ 5. If you think the price will go up in the next 2 months, you could try to buy the option. CoinRepublik offers any player the opportunity to write or buy options on the prices of hundreds of external assets. For more details on options go to the Options section.

Launching an option does not involve any cost, but a minimum guarantee of $ 10 is required for USD or 100 local currency options for local currency options. The guarantee is used to pay players who exercise their option. The best way to understand how an option works is to give a concrete, step-by-step example:

1. Let's say you have 0.01 BTC ($ 100) that is traded today at the price of $ 10,000 and you consider that there are minimal chances to reach the price of $ 11,000 next month but you still want to make a profit from the ownership you have, so you launch an option.

2. The option you launch entitles any player to buy a maximum of 0.01 BTC from you, at the price of $ 10,000 (strike price) for the next month. For this service you want 5% of the amount that the player could buy. The 5% is called the premium and represent your fee for this option.

3. A player is convinced that in the next month the BTC price will exceed $ 11,000 so he enters the option and reserves the right to buy 0.001 BTC, the equivalent of $10. For this he will pay you 5% of $ 10, that is $ 0.5

4. Suppose the BTC price rises to $ 11,000. The player who bought part of your option (0.001 BTC) could exercise it at this time by using $10 to buy 0.001 from you and then sell the 0.001 for $ 11, obtaining an immediate profit of $1. The loss of the player who launched the option is reduced to the price difference with which he could have sold 0.001 BTC

5. Assume that BTC does not reach even $ 10,500 in the next 30 days, which makes it impossible to exercise the option for profit. In this case, most buyers will refuse to exercise the option and you win the premium.

6. At the end of the 30 days, the option expires and the remaining amount under is returned to the person who initiated the option. The amount remaining in the guarantee is the amount in BTC blocked in unexercised options together with the rest of the initial guarantee. For example, if BTC reaches $ 11,000 and out of the 0.01 BTC, 0.005 ($ 50) was exercised, then the one who initiated the option will receive back 0.005 BTC ($ 55). For the exercised options, you will receive another $ 50, and from the premium tax another $ 2.5, for a total of $ 107.5, even if you practically lost the option.

In conclusion, the risk of those who initiate options is reduced to the price difference between the time of launching the option and the expiration date, while for those who buy the option, the risk is reduced to the premium fee.

Like we said before, options are harder to understand but they can bring you a lot of money.


Nano1616   ~1 month ago



silvia   ~1 year ago




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Transactions in derivatives based on foreign exchange rates or the prices of precious metals, commodities or equity indices products carry a high degree of risk. Any transaction involving these products is exposed to, among other things, changes in a country's economic condition or political climate as well as acts of nature or terrorism - each of which may substantially affect the price or availability of the these derivatives. Speculative trading in derivate products is a challenging prospect with a high level of risk. You must therefore carefully consider your investment objectives, level of experience and appetite for such risk prior to trading these products. Most importantly, do not invest money that you are not in a position to lose. In addition, trading on a margin basis means that any market movement will have a magnified effect on your deposited funds. This can work against you as well as for you. The possibility exists that you could sustain a total loss of all the funds you have deposited. PipsTycoon's trading system is designed to automatically liquidate all open positions if your margin deposit is in jeopardy so that you cannot lose more than the funds you have on deposit in your account. We encourage you to employ such risk-reducing strategies as 'stop-loss' or 'stop-limit' orders, but you should be aware that market conditions may make it impossible to close out your order at the level specified. There are also risks associated with using an Internet-based trade execution software application including, but not limited to, the failure of hardware and software. ANNO1777 Labs maintains ‘back up’ systems and contingency plans to minimise the possibility of system failure. Before deciding to trade, you should become aware of all the risks associated with leveraged productstrading, and seek advice from an independent and suitably licensed financial advisor. Under no circumstances shall we have any liability to any person or entity for (a) any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to your trading operations any direct, indirect, special, consequential or incidental damages whatsoever.
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