As analyzed before, BTC has returned to its price before Trump imposed tariffs, but neither ETH nor the total market value of cryptocurrencies has returned to its state before Trump imposed tariffs.
In fact, I am a little bearish. But on the other hand, I am not very sure about the short-term fluctuations.
On the other hand, I do not think ETH will fall sharply. (There may be a sharp drop during this period, but when the option expires at 16:00 on May 19, there may not be a sharp drop).
At this time, the method of "buying put options" may not be as good as "selling call options".
➤ Let’s first understand the concept of selling options
❚ Take selling call options as an example
The right to hold a call option is to buy at the strike price when it expires.
Then, selling a call option means being forced to accept it. If the buyer chooses to exercise the option, the seller must sell it. If the buyer chooses not to exercise the option, the seller does not need to sell it.
Of course, the buyer pays a premium for this right.
◼︎ Give an example
Taking this ETH option as an example, assuming the purchase price of the exercise price of 2500 is 50, and Brother Bee sells 1 quantity.
① If the ETH price is 2540 at expiration, which is lower than 2550, the buyer will give up the option. The option buyer will lose about 50, and the option seller will earn about 50 as the option fee.
②If the ETH price is 2580 at expiration, which is higher than 2550, the option buyer will choose to exercise the option. Although the option buyer obtains exercise income (2580-2550=30), minus the option fee of 50, the option buyer loses about 20. The option seller is just the opposite. Although the option seller loses -30 on exercise, he gets the option fee of 50, so the option seller's income is about 20.
③If the price of ETH is 2630, which is higher than 2550, the option buyer will choose to exercise the option. The buyer's income is approximately = 2630-2550-50=30. The seller's loss is approximately = 30.
❚ Summary
First, as long as the price of the underlying asset is favorable at expiration, the option buyer will choose to exercise the option.
Call option: when the expiration asset price > the strike price
Put option: when the expiration asset price is less than the strike price.
Second, the option buyer may not necessarily make a profit when exercising the option. When the buyer's exercise income is greater than the option cost (i.e. the option transaction price) and the buyer's handling fee, the option buyer makes a profit. Otherwise, the option buyer exercises the option just to reduce the loss.
Profit from exercise of call option buyer = (expiring asset price - exercise price) * quantity
Profit from exercise of put option buyer = (exercise price - expiry asset price) * quantity
Third, buying call options can only make money if the increase at expiration is large enough to cover the option cost and fees.
Fourth, the lower the strike price, the higher the buyer's exercise profit. However, option sellers also understand this, so the lower the strike price, the higher the selling price of call options.
Therefore, if the fluctuation is not large enough:
When bearish, selling call options may be more advantageous than buying put options.
When bullish, selling put options may be more advantageous than buying call options.
For example, this position held by Brother Feng currently shows a floating loss. The strike price is 2550 and the selling price is 50.3. It expires at 4 pm. Let's see what the profit and loss will be at the expiration date?