Ethereum Options are one way to invest in the crypto market by using derivative contracts that give the right, not the obligation, to buy or sell Ether (ETH) at a set price and time. Ethereum Options can provide an advantage for investors who want to speculate on ETH price movements, both up and down.
One of the advantages of Ethereum Option is that investors do not have to pay initial margin or bear the risk of liquidation if the price of ETH moves against their position. This is because Ethereum Options only require a premium fee paid upfront to buy or sell a contract. If the price of ETH does not reach the strike price at maturity, then the contract will expire without value and the investor will only lose the premium paid.
As such, Ethereum Options provide higher flexibility and security than futures or spot trading, which requires a large initial margin and is prone to liquidation if the price moves beyond the set margin limit. Liquidation is the process by which an investor's position is forcibly closed by an exchange or lender if the value of their collateral falls below the value of their loan. Liquidation can cause huge losses for investors and disrupt market stability.
How Ethereum Option Works
Ethereum Option is a contract between two parties, namely a buyer and a seller. The buyer of an Ethereum Option has the right, not the obligation, to buy or sell an amount of ETH at a specified strike price at maturity. The seller of an Ethereum Option has an obligation to sell or buy a certain amount of ETH at a specified strike price at maturity if the buyer decides to exercise his rights.
There are two types of Ethereum Options, namely call options and put options. Call options give the buyer the right to buy ETH at a strike price determined at maturity. Put options give the buyer the right to sell ETH at a specified strike price at maturity.
The buyer of the Ethereum Option pays a premium fee to the seller to obtain the right. Premium costs are determined by factors such as ETH spot price, strike price, maturity time, volatility, and interest rate. In general, the higher the strike price, the lower the premium cost for call options, and vice versa for put options. The longer the expiration time, the higher the premium cost for both types of options. The higher the volatility and interest rate, the higher the premium cost for both types of options.
At maturity, the buyer of an Ethereum Option can choose whether or not to exercise his rights. If the buyer exercises his rights, then the seller must fulfill his obligations. If the buyer does not exercise his rights, then the contract will expire without value and the buyer will only lose the cost of the premium paid.
The profit and loss of Ethereum Options depend on the difference between the spot price of ETH at maturity and the strike price, minus the cost of the premium paid. In general, call option buyers will benefit if the ETH spot price is higher than the strike price plus premium costs, and vice versa for call option sellers. The buyer of the put option will benefit if the spot price of ETH is lower than the strike price minus the cost of the premium, and vice versa for the seller of the put option.
Ethereum Option Examples
For example, a bullish investor wants to speculate on the rise in the price of ETH in the next three months. The investor buys one call option contract with a strike price of $3,000 and a premium cost of $200. One call option contract represents 1 ETH. If at maturity, the spot price of ETH is $3,500, then the investor can exercise his right to buy 1 ETH at $3,000 from the seller. The investor can then sell 1 ETH at $3,500 on the spot market, resulting in a profit of $300 ($3,500 - $3,000 - $200).
If at maturity, the spot price of ETH is $2,500, then the investor will not exercise his right to buy 1 ETH at $3,000 from the seller, as doing so would be detrimental. The investor will let the contract expire with no value, thus only missing out on the $200 premium fee.
For example, a bearish investor wants to hedge the value of his portfolio of 100 ETH from the decline in the price of ETH in the next three months. The investor buys 100 put option contracts with a strike price of $2,500 and a premium cost of $100. One put option contract represents 1 ETH. If at maturity, the spot price of ETH is $2,000, then the investor can exercise his right to sell 100 ETH at $2,500 to the seller. The investor can then buy back the 100 ETH for $2,000 in the spot market, resulting in a profit of $40,000 ($2,500 - $2,000 - $100) x 100.
Jika pada saat jatuh tempo, harga spot ETH adalah $3,000, maka investor tersebut tidak akan menggunakan haknya untuk menjual 100 ETH dengan harga $2,500 kepada penjual, karena hal itu akan merugikan. Investor tersebut akan membiarkan kontraknya kadaluarsa tanpa nilai, sehingga hanya kehilangan biaya premi sebesar $10,000 ($100 x 100).
Manfaat dan Risiko Ethereum Option
Ethereum Option memiliki beberapa manfaat dan risiko yang perlu dipertimbangkan oleh investor, yaitu:
Manfaat Ethereum Option
Berikut ini sejumlah manfaat dari Ethereum Option:
Fleksibel
Ethereum Option memberikan fleksibilitas dan leverage yang lebih tinggi daripada perdagangan spot atau berjangka, karena investor hanya perlu membayar biaya premi yang relatif kecil untuk mendapatkan hak atas sejumlah ETH yang lebih besar.
Diversifikasi
Ethereum Option memberikan perlindungan dan diversifikasi yang lebih baik daripada perdagangan spot atau berjangka, karena investor dapat mengatur harga strike dan waktu jatuh tempo sesuai dengan ekspektasi dan toleransi risiko mereka.
Peluang Profit
Ethereum Option memberikan kesempatan untuk mendapatkan keuntungan dari berbagai skenario pergerakan harga ETH, baik naik, turun, atau sideways, dengan menggunakan berbagai strategi opsi, seperti long call, long put, short call, short put, straddle, strangle, dan lain-lain.
Lebih Aman
Ethereum Option memberikan keamanan yang lebih tinggi daripada perdagangan berjangka, karena investor tidak perlu membayar margin awal atau menanggung risiko likuidasi jika harga ETH bergerak melawan posisi mereka. Hal ini dapat mengurangi stres dan biaya transaksi bagi investor.
Ethereum Option Risks
In addition to the benefits mentioned above, Ethereum Options also have their own risks that investors can consider.
Premium Cost
Ethereum Options have a premium fee that must be paid upfront by the buyer, which can reduce potential profits or increase potential losses. Premium costs can also change significantly as factors affect them, such as ETH spot price, strike price, maturity time, volatility, and interest rate.
Limited Time
Ethereum Options have a limited expiration time, which means that the rights held by the buyer will expire without value if the price of ETH does not reach the strike price at maturity. This can lead to a total loss for buyers if the price of ETH moves beyond their expectations.
Low Liquidity
Ethereum Options have lower liquidity risk than spot or futures trading. Therefore, investors need to pay attention to the volume and depth of the crypto options market, as well as the spread between the buy and sell price. If the crypto options market is illiquid, investors may find it difficult to open or close their positions at the desired price, or even be unable to do so at all. This can lead to opportunity losses or capital losses.
Conclusion
An explanation of the workings, benefits, and risks of Ethereum Options, which are derivative contracts that give the right to buy or sell Ether at a set price and time.
This paper also provides examples of options strategies that investors can use to speculate or hedge against ETH price movements. One of the advantages of Ethereum Options is that investors do not have to bear the risk of liquidation, which is the process of forcibly closing positions if the price moves against them. However, Ethereum Options also have premium fees, expiry times, and liquidity that investors need to consider.
How to Buy Ethereum (ETH) on Bittime
You can buy and sell ETH tokens in an easy and secure way through Bittime. Bittime is one of the best crypto applications in Indonesia that has been officially registered by Bappebti. ETH is available on Bittime with ETH IDR pairing.
To be able to buy ETH/IDR tokens on Bittime, make sure you have registered and completed identity verification. In addition, also make sure that you have enough balance by depositing some funds into the wallet. For your information, the minimum purchase of Bittime assets is IDR 10,000. After that, then you can make ETH purchases in the application. Complete Guide on How to Buy ETH on Bittime.
Monitor the price chart movements of Ethereum (ETH), Bitcoin (BTC), Dogecoin (DOGE), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Also Read:
What Is Ethereum (ETH) 2.0 and How is It Different from Ethereum
Ethereum (ETH) Prediction 2024? Up or down?
Crypto Options Market: Where to Trade Digital Options
DISCLAIMER: This article is informational in nature and does not constitute an offer or solicitation to sell and buy any crypto asset. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices may change significantly from time to time and Bittime is not responsible for fluctuations in crypto asset exchange rates.
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