The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
Visit Performance Disclosure for information about the performance numbers displayed above. Visit www. Real time prices by BATS. Like buying and selling, there are two sides to an options contract; On one side is the "holder," or buyer, and on the other is the "writer," or seller.
This two-sided concept covers both put and call options — meaning that you can go long or short on both. The connection between a holder and a writer is the premium paid. The reverse is true of "writing. If the holder decides to act on the options contract, the seller will have to keep their word and relinquish their right.
They only get paid the premium for the decision. The Greeks Source: Robinhood Learn Certain terminologies are used to understand the factors responsible for an option's price in Bitcoin options trading. These terms are called the "Greeks. Here are the five members of the Greeks: Delta reads how reactive an option's price is to a point move in Bitcoin's underlying price. Gamma denotes how much the Bitcoin option's delta moves, for every point move in the underlying Bitcoin price.
Theta measures the rate of decay of a Bitcoin option with time. The lower the theta, the farther from the expiration date; the higher the theta, the closer to the expiration date. Vega keeps a tab on how sensitive an option is to the implied volatility in the underlying Bitcoin price. Bitcoin is a volatile asset, so vega holds a bigger vote in determining option price. Rho shows the reaction of an option's price to changes in interest rates.
Bitcoin vs. Bitcoin Options The relationship between Bitcoin and Bitcoin options can be likened to that between a mother and her child. In the same way, Bitcoin options can be perceived as an extension of Bitcoin. We already know why BTC is sold and is currently the biggest cryptocurrency by market cap : High demand. However, Bitcoin options and other derivatives are sold because they serve certain specific purposes, which we shall explore in detail below.
Hedging Hedging is one of the most common reasons for trading futures or contract options. To understand hedging , picture a garden close to a river or water pathway. It's safe to presume that such a piece of land will, sooner or later, get washed away by the force of water currents. In such a situation, the owner of the land builds a fence or hedge around it to shield it from erosion. This example is a close, albeit simplistic, representation of hedging in the financial markets.
An options contract "shields" the value of the underlying asset — in this case, Bitcoin — by "locking" its value, i. Price Speculation Traders and investors use contracts such as options to express their short-term sentiments bullish or bearish on an asset. When the asset records a substantial increase in value, you can profit by selling off an amount of it. What happens, however, when you feel a bearish run is imminent in the upcoming months?
Although the underlying asset's price may bounce back after a while, by purchasing a put option you would maximize your chance to make some profit. Expiration Dates Expiration dates refer to the agreed date on which the contract option — the option of either buying or selling — is to be exercised. Note that not every Bitcoin options contract can only be fulfilled on its expiration date; some can, in fact, be exercised before the expiration date. Below, let's look at the two methods of contract fulfillment.
European-Style Options Contracts European-style options contracts mandate the holder to fulfill only the terms of the agreement on the date of expiration. Even if a contract is in the money ITM , the holder can't exercise their option until the set date, on which the fortunes of such a contract may have reversed. A European-style contract requires higher accuracy in speculation than its American counterpart.
At the time of this writing, major Bitcoin options trading platforms offer only European-style contracts. American-Style Options Contracts Options contracts styled in this manner give the holder the privilege of exercising the contract before the expiration date.
If a contract is ITM, the holder can decide to use their trade option, thereby making a profit. The American way of doing things implies that a much lower degree of accuracy in speculation is required. Making a profit requires the contract to be ITM any time: Between the date entered and the expiration date. How to Trade Bitcoin Options Bitcoin options are offered on several exchanges, which have different methods of allocating contracts.
For example, on a crypto exchange , the options contract is upheld directly between the customer and the exchange. To enter a contract option, the user chooses the amount of Bitcoin they wish to trade the options contract on, thus determining the premium.
Since the trade takes place between the user and the exchange using a computer program , if the value being lost by the user were to pass a threshold, the user would be liquidated to restrict losses , with the only money lost being the premium. On some other exchanges, a user "writes" a contract and waits for their contract to be matched by another who orders to purchase a contract with similar terms to the writer.
The exchange regulates this trade, and a fee is charged to ensure fairness. For a step-by-step guide on how to do so, please click here. To the Bitcoin miner , options can keep their rewards at reasonable levels when implemented carefully.
To the Bitcoin investor, Bitcoin options are a good way to speculate on the rise and fall of Bitcoin. Even if BTC is bleeding red, you can make money like a true businessperson. To the investor who wants a "feel" of the market without prior experience with Bitcoin or cryptocurrencies, no worries: There's an option pun intended for you in the form of Bitcoin options contracts. Conclusion The goal of every trader and businessperson is to make a profit; no one sets out to lose.
Due to the sophisticated nature of economic systems, this goal is now more achievable than ever.
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