Own Bitcoin With Little Downside Risk | BTC Options Introduction | Crypto Wizards



hello crypto wizards Shaun here and we are looking at some pretty unprecedented price action movement on Bitcoin at the moment I mean we've been from like $3,000 mid September to what 7600 on the fifth of November now trading at about 7,200 so the price action is absolutely mad at the moment now you might be looking to get in on Bitcoin and what I wanted to talk about is how to significantly reduce your risk in entering a trade and buy yourself time to see what happens with the price whilst owning Bitcoin now normally what you would see happen if you bought bitcoins so I'm gonna just go to one of my tools over here if I buy a Bitcoin right now at today's price if the price moves down I lose money if the price goes up I'll make money straightforward right well what if we wanted to protect this downside so that if the price goes down you only lose a certain amount of money think of it like car insurance you buy insurance for your car and you have an accident and there's like five grands worth of repairs to do but your ex's is only $200 your maximum risk is $200 plus whatever you paid for that insurance an option is kinda similar and that's what we want to talk about here is buying an option to protect your downside so what is an option on investopedia an option is a financial derivative that represents a contract sold by one party the option rights are to another party the option holder the contract offers the buyer the right but not the obligation to buy or sell a security or another financial asset and agree at an agreed-upon price the strike price during a certain period of time or at a specific date known as the exercise day blah blah blah what does that actually mean so let's say that I give you the right to sell Bitcoin between now and the 24th of December at a certain price let's call it $7,500 so the more the price would move down with Bitcoin the higher the value of that option because if I'm allowed to sell at this price and the price is moving down the value of that contract between us is increasing and that's exactly what I wanted to talk about over here so for example let's say we're not going to buy any coin let's say we're going to buy a put option and we're gonna buy it at yeah $7,500 this is how a put option works now a put makes money when the price goes down if you buy a put a call option makes money if the price goes up now right now we're gonna look at the price moving down I know that you're bullish but we're going to come to that in a second let's say the price moves down the put option as I was just explaining makes money you your profit increases as the price moves down let's say the price moves up well your profit decreases now interestingly you want to hold some coin and what happens when the price of that coin goes up as we saw earlier you make money so let's enter in two transactions here the first is we're going to buy this insurance we're going to buy this put option with a strike price 7,500 dollars for an agreed date of December the 24th as the expiry date and let's say now we want to buy some coin this is what your profit and loss scenario would now look like and so in this trading tool over here it allows us to see into the future essentially what would our profit be determining depending on what happens with the price as you can see here if the price Rockets up your profit is unlimited I mean if Bitcoin goes to $15,000 you're going to make a ton of money if it goes to $10,000 you're going to make two-and-a-half grand just owning one Bitcoin but your loss is capped at $500 now that's kind of interesting because before when we looked at this without buying that insurance your loss was not kept it could go to zero and you could lose all your money but now you've bought some insurance so if we enter into that contract we have the insurance and it's a very safe way to enter into owning Bitcoin so I hope you found that useful there's going to be a lot more videos on options because nobody is talking about this Bitcoin is highly volatile and you can make money no matter which way the price moves I'll give you a quick example of that now let's say we don't own any point we buy one put and we buy one call both at the same strike price you can see that no matter which way the price moves you make profit and you lose money if the price doesn't move now the nice thing about this and the nice thing about options is you have time even though the option loses value over time the market changes over time the Bitcoin price will do different things over time and it allows you to buy time to let the price do its thing rather than entering into a trade where you have your resistance line here and your support line here next thing you know the price plummets over there you've lost money you've cut out of your stop you're upset because you didn't have the time only then to see the next thing happened the price rockets up and you're really annoyed so this is a really good way in a safe way to enter into buying Bitcoin and we'll talk about in some other videos how you can actually do this what are the exchanges that allow you to buy options what's happening with the Chicago Mercantile Exchange what's happening with the futures market why you should care and why you need to get knowledgeable on that so I hope you found this useful and if you have any questions just head over to crypto wizards net and ping me a message or two and we can we can answer any questions you have either online or over video so thanks a lot for watching and take care

7 thoughts on “Own Bitcoin With Little Downside Risk | BTC Options Introduction | Crypto Wizards”

  1. This video is just excellent. thanks for the info. I am going to subscribe and to see all the videos. Regards from Argentina!!

  2. so, have you made or are you making more option vids for BTC? I use to do spreads on options years ago (on stock) and I totally get it but very rusty… would like to see more instructional vids using options to either hedge or trade on…. cheers,

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