How to Choose the Right Strategy When Trading Bitcoin Options on Quedex | Crypto Wizards

hey wasn't Shaun here now in this video I want to take you through some awesome Bitcoin trading strategies using options now a lot of you would have seen the recent video I did where I bought my first Bitcoin option on the Q decks trading platform and that trade has worked out really well for me so what I wanted to do was just to upskill that a bit take it to a whole nother level and in doing so one of the strategies that I'm going to show you in this video is going to show you how you can not only protect your downside so that if the price of Bitcoin goes down you don't lose as much money but to also take instant cash out of the market in doing so so let's get into it so the first thing I want to give you is a fantastic resource if you go to option playbook con there's an option strategies tab and on that tab it lists out all sorts of cool strategies and it shows you the profit and loss you'd make depending on what happens with the underlying price a for example the protective put which the very first video ever posted on crypto wizards was about the protective put if you haven't seen that go back and watch it it's a cool video but what is showing you is that if the price of Bitcoin goes up I'm making money if the price of Bitcoin goes down I lose a fixed amount of money here's my profit here's my loss this is the underlying price and the blue line shows the P&L so really useful charts so straight away I can tell based on what is happening in the market what's happening with the price of Bitcoin comparing it to maybe some technical analysis what sort of strategy might I want to try to I want a bullish strategy a berry strategy or a neutral strategy and so you can test this out to your heart's content so I really recommend this as a resource now we're gonna focus on two strategies today one is the color strategy I thought that'd be good because it'll teach you about buying and selling two different options and one is a covered call strategy which is just very useful as I mentioned in the beginning of this video it's gonna really open your mind as to the possibilities with options so let's talk about some of these now the first one I want to look at is the color strategy so the color strategy is where we own the underlying stock or in our case Bitcoin we're going to buy a put and we're going to sell a call both out of the money so first of all the P&L looks very smooth very neutral here but in reality option prices are all over the place you've got different volatility rates you might be placing a market order so you might be buying at the ask or selling at the bid so I want to show you how you can navigate your way through this and test it for real so that you can actually make money in the real world with Bitcoin using these strategies so the first thing you want to do is head over to crypto wizards when you get to the market scanner just go over to the profile tab now you don't need to be a paid subscriber to get this all these tools are absolutely free one of them that are optimized today is the qdx options playbook so you just click on that and you download that to excel when you do that you will get a model that looks like this so just click on reset now the reset button is very useful by the way so if you've tried something and at none of it makes sense or you think you've got something wrong just hit reset and it'll rebase everything for you now that you have this model what you're going to be able to do is place up to five hypothetical trades so different combinations to try and work out what sort of position you will be at expiry in terms of profit or loss so a really really really useful model I mean I've spent a lot of time developing this for my own use so it works just the way I like it so I really hope you find this model useful but it's going to be extremely useful when it comes to looking at the rates and volatility rates on queue deck so that's the next place we want to go so let's head over to queue decks net and when you get to queue TxDOT net you just click on options as you know I like to go for the later expiry and we're going to hit the options chain so we click on options again and now I have my options chain so on the Left I have all my call options on the right I have all my put options really awesome user interface laid out here for me and the strike price is down in the middle now if I go back to the playbook it says yeah I need to buy a put with a strike price of a but before I do that I need to own some coins so the first thing we're going to do we're going to go to our Excel model we're going to click set positions position one we're going to buy some coin and the value that we have to pay for that coin if I look at queue decks it's about nine and a half thousand dollars so nine five to nine for the coin right now so nine five to nine and I don't need to do any of this other stuff because we're just buying coin right now so I'm going to add that in so obviously if you buy a Bitcoin the price of Bitcoin goes up you make money if the price of Bitcoin goes down you lose money there's nothing fancy going on here nothing outside of what you'd normally do if you just bought Bitcoin but now we're going to get a little bit more technical and fancy the second part of the strategy says to buy a put with strike price a so strike price is typically going to be below the current underlying value so if the value right now is about nine a half thousand dollars we probably want to look at about eight and a half thousand dollars as the strike price so let's go and have a look at that so I'm going to pick on eight and a half thousand and it says here that I need to buy a put so I need to be on the put side eight and a half thousand dollars and if I'm buying and I'm placing a market order so forget about limit orders right now let's just assume I want to buy this and place a market order which I don't always recommend but we're going to do it in this example the implied volatility is about a hundred and seventy eight point four percent so what I do is I go back to the Excel model over here set positions position two I'm gonna buy a put option the underlying value we said was ninety five to nine and the exercise price is eight and a half thousand oh one of the things I forgot very sorry we need to go to the 29th of June I like the later expire ease I like to buy myself as much time as possible so I'm gonna look at the eight and a half thousand dollars strike price on the 29th of June expiration and when I do that the implied volatility is one hundred and fifty eight percent so eight and a half thousand dollars one hundred and fifty eight percent for June the 29th one five eight I'm gonna add that in so you can already see I don't need to close this window by the way I'm gonna add a position three shortly so click on position three you can already seen that I've now fixed my loss so if the price of Bitcoin goes down I will only lose a certain amount of money if the price of Bitcoin goes up and it ends up past this price level so the eleven thousand seven hundred and something mark or eleven thousand nine hundred mark I am basically in profit so fix my loss but the price has to go up quite significantly for me to be in profit as well so the next position that I want to place now is I wanted to sell a call at strike price B so I want to sell a call option so I'd say ten and a half thousand as the strike price now if I'm selling a call I have to sell to the bid so I'm gonna sell with a lower volatility of a hundred and two 9% so if we go back here we saw I bought with a volatility high 158 and I'm selling with the volatility low which is like a hundred and twenty five hundred and twenty nine percent so already I'm at a disadvantage because I'm placing market orders and the volatility rates I'm getting aren't favorable but that's fine the point of this model is for you to see that and what I'm trying to show you is how you can navigate your way around so that you can find some sweet spots I probably shouldn't say arbitrage but you understand what I mean ten and a half thousand dollars strike with the volatility of let's just call it one hundred and thirty one point nine percent so nine five to nine is the underlying position three we're going to sell a call option ten and a half thousand dollars twenty eighteen June 29th that still in there and here we take it again one hundred and twenty-eight point five percent it doesn't really matter for the purposes of this model to get the percentages to exact but just for this example I will add the position in and exit now you can see if you compare this to the playbook you can see the same pattern which is awesome that means we're roughly on the right track now it's not really in my favor because the last section to me looks a lot wider than the profit section and the reason for that is because of the volatility if I got the same volatility with the put that I was buying I would actually be in a favorable position my risk to reward would look quite favorable with us so this is really useful this also useful because it shows you based on the volatility rates it shows you what sort of profit and loss you would be looking at if you amalgamate all these trades are really useful I hope you get so much use out of this tool for those of you who are wondering that the prices look different to Q decks because here I'm working in dollars I have got some Bitcoin prices built in here I haven't fully optimized it yet but I have checked the pricing here against the model that Q decks provides as well on their website and I can tell you the dollars tie-back exactly and the reason for that is because both models use the black and Scholes model if you don't know what that is or if any of this is confusing you make sure you go back watch the video that I did on options the introduction to options for beginners and then this should start to make a lot more sense to you but that's a really cool strategy I'm gonna hit clear all and now let's go and look at the next strategy so if we go to the option strategies I wanted to take you through the covered call strategy this is a fascinating strategy to me and it's a very popular one as well okay so the very first thing is we own the stock or we own the coin so if I go back to Q decks the price is about 9 5 3 8 so let's do something that's the price I pay so position 1 I am going to buy some coin at 9 5 3 8 I don't need to put anything else in same as before price of Bitcoin goes up I make money if price goes down and lose money the next thing we wanted to do was we wanted to sell a call it strike price a so strike price a meaning either at the money or just out of the money so if we go to Q decks and now want to sell a call option we know we're at about nine and a half thousand dollars in fact bitcoins price has gone just a bit above that so let's assume that I'm gonna sell a call at this price and we're looking at selling with volatility at one hundred and twenty six percent at nine and a half thousand dollars so let's set position to we're we're gonna sell a call option the underlying values 9 5 3 8 the exercise price is going to be nine thousand five hundred with an expiration of 2018 June the 29th and volatility I need to check that again was about a hundred and twenty six point two percent and I'm gonna add that in now this is fascinating because we know the price of Bitcoin right now is about nine and a half thousand dollars but check what happens at expiry if the price goes below nine and a half thousand dollars in fact if it's above this sort of six thousand eight hundred mark level I'm in profit so even if the price drops some by you know another couple thousand dollars nearly I'm still going to be in profit if the price goes up and it Rockets up I make a fixed amount of money be I've sold a call option and I'm liable for that option but I also own the underlying asset it's very similar to that house example we used when we were talking about the introduction to options where the owner of the house gave us the rights to buy the house we are that owner of the house in this example now if the price goes significantly down we lose money here's the interesting thing and the useful thing with this model is I can set this back to none so now removing position two we can see if the price goes down to say $5,000 I lose about $4,000 if the price goes down to about $1,800 I lose nearly $8,000 so let's put that option back in well if the price goes down to nearly $1,800 only lose $5,000 now so not only have I increased my probability of making a profit and a healthy profit at that because I'm taking this cash out of the market immediately when you sell I'm the seller so give me the cash here's the option right not only have I done that and increased my probability but I've also reduced the amount that I'll lose because of the money that I'm taking from selling the call option in the first place it's a really useful strategy now getting back to Q decks the way that you would trade this is you just go to the options chain if I wanted to say buy my put option as an example I would have to click on the put side with the strike price so anywhere on this row if I click it'll take me through with the call side it's the same thing so let's just click on puts for eight and a half thousand now what Cutex does is it already gives you a profit and loss chart and this is really useful saves a lot of time you don't then need this excel model etc the only reason you'd use the Excel model is if you are Mehldau mating a lot of trades but here if you're just going to buy one or sell one option then this P&L is really useful and it's frankly it's all you need so really awesome way to do it and then your different strike prices are here at the top so you don't even have to go to the options chain you can just go to the chart and pick your expiry or which strike price you want etc once you've found that then you have the order book and you can see the bits in the asks and also the implied volatility so let's assume that I want to sell an option in this case I would copy the bid over here and the implied volatilities one hundred and twenty eight point two percent so tells me down here as well now the minimum amount that you can trade and somebody asked in a previous video and I'll thank you for that what's the minimum you can trade well there is no minimum you know one contract is one dollar so I can page say five hundred dollars worth as an example but the minimum that you can withdraw is 0.01 Bitcoin so that's just some information that you might find useful so what you're really going to love about all of this is you have a useful tool that you can just implement and test out different strategies that can help you solidify your understanding of how options work and theoretically what would happen should you place different trades you have this amazing user interface by qdx now you know I bought my first Bitcoin option with Q decks it was because Q decks was recommended to me by one of our subscribers here on the crypto was its channel and I love their user interface and that was before crypto wizards took on any affiliation with Q decks now for those of you who are new to this channel crypto wizards is affiliated with Q decks so you get 10% off if you use the link in this video you don't have to use the link if you click on the link in the Excel model trade on Q decks that is an affiliate link so if you choose to use Q decks without using that link it's absolutely fine it just means that if you use the link you get rewarded crypto wizards gets rewarded and Q decks gets rewarded so it's a win-win-win situation anyhow I hope you found this video really useful remember to let me know what your questions are in the comment field and until the next video talk soon

One thought on “How to Choose the Right Strategy When Trading Bitcoin Options on Quedex | Crypto Wizards”

Leave a Reply

Your email address will not be published. Required fields are marked *