If you think that prices will move up, and you want to trade 1 BTC worth of value but do not have 1 BTC, you can buy a Call option and profit from Bitcoin’s volatility.
Why buy Call?
Unlike spot trading which requires full collateral, buying a Call option allows you to participate in the movement of an underlying asset for a relatively small price (Premium Payable) while enjoying leveraged returns.
Here’s a scenario:
How do I profit?
Why buy Call?
Unlike spot trading which requires full collateral, buying a Call option allows you to participate in the movement of an underlying asset for a relatively small price (Premium Payable) while enjoying leveraged returns.
Here’s a scenario:
- You are bullish on BTC and expect it to trade above $11,000 on 6th March 2020
- You can buy a Call for 1 BTC with Strike Price at $11,000, Settlement Date on 6th March 2020
- The cost for making this position will be 238.25 SP$ (Premium Payable)
How do I profit?
- In order to profit from your buy Call, BTC will have to trade above your Breakeven Price at Settlement Date
- Breakeven Price is calculated as [Strike Price + Premium Payable]
- In this scenario, Breakeven Price will be $11,238.25 (11,000 + 238.25)
- The higher BTC trades above your Breakeven Price at $11,238.25, the greater your profit. Technically, your profit is unlimited
- However, if BTC trades below $11,238.25, your maximum loss will be limited to your Premium Payable (238.25 SP$), even if BTC goes to $0
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