Options strategies are an interesting way to trade cryptocurrency. While some traders prefer the simplicity of option selling, others want something more advanced and sophisticated.
The most common options crypto strategies are the following:
Primary Research
In the options crypto space, primary research is a term you will hear often. This is because most of the coins you buy are based on an idea. There are no real products or services behind them (yet). The market for such ideas is therefore small and speculative. Many projects have been launched to date and have failed due to poor execution skills or lack of planning. As such, investors must do their due diligence before diving into these coins.
Long Strangles
A long strangle is when you buy an at-the-money call and put it with the same strike price but different expiration dates. This means that you would require more time to spend your money than if you were to buy a simple call or put, so it’s a good idea to think about how much time you want to spend on this strategy before making any trades.
Long Vertical Spreads
A vertical spread is when you buy one option with a lower strike price and another with a higher strike price. This means that your net exposure is limited to the amount of money you have available in your account, which means it’s safer than buying two options with different strikes and expirations dates, but it also limits your profit potential because both options’ prices must move in the same direction before either one expires worthless (known as being “covered”). This strategy can be used for both short calls and puts, as well as long calls and puts.
Put Option Trading Strategy
The put option is a contract that gives you the right, but not the obligation, to sell an asset at a fixed price before the expiration date. This type of contract is commonly used for stock index futures and stocks. You can also buy a put option on an individual stock or index.
Call Option Trading Strategy
Call options are contracts that give you the right, but not the obligation, to buy an asset at a fixed price before its expiration date. This type of contract is commonly used for stock index futures and stocks. You can also buy a call option on an individual stock or index.
Scalping
Scalping is the practice of quickly buying and selling a currency pair to take advantage of price fluctuation. In this strategy, you focus on buying and selling smaller amounts of crypto at high frequency. Scalping is also known as “micro-trading,” “swing trading,” or “market-making.” Scalpers try to profit from buying low and selling high by buying when the price is low and selling when it rises. Scalping may be profitable in some markets, but it has many drawbacks:
It can be challenging to avoid losing money with this strategy. If the market moves against you, it’s hard to catch up unless your orders are very efficient (and even then, it’s not easy). It’s also difficult to determine what price you should buy or sell using this method; there isn’t always a clear line between risk and reward with scalping. You also need to see market prices rapidly changing when you place your orders, which can be difficult because many platforms don’t provide real-time pricing data.
High-Frequency Trading (HFT)
High-frequency trading is a way to trade with the highest profit percentages. This type of trading involves placing orders as rapidly as possible, usually in microseconds or nanoseconds. Traders who use this strategy typically get higher profits as they can place their trades before the market moves against them. It can be executed in many ways, including:
Broker-originated orders that trade within a specific period for a particular financial instrument and size;
Real-time exchange feeds that allow high-frequency traders to access real-time liquidity; and
Automated market-making through high-frequency algorithms that predict future prices based on historical data.
Dollar-Cost Averaging
Dollar-cost averaging is a tried and true strategy that has been used to invest in stocks, bonds, and real estate for centuries. It’s also called dollar-weighted averaging because you’re buying all of your shares at once at the average price paid over time. This simple strategy builds balanced investment portfolios by investing an equal amount at regular intervals, regardless of market movements. You will buy bitcoin or other cryptos at a fixed price so that you can invest in them over time without worrying about market volatility or price changes.
For example, if you invest $10,000 once every three months, you will have invested $30,000, and your portfolio will be in balance even if the market goes down by 50%. This way, your investments will grow steadily, and you won’t have to worry that one or two bad months could ruin your entire year’s worth of gains.
Day Trading
Day trading is a strategy where you trade intending to make money quickly, sometimes within one day. Depending on your strategy, you can do this by buying low and selling high or vice versa. Day trading crypto is risky because there are so many factors involved in determining whether a given coin will go up or down in value over time.
It requires a lot of knowledge about the market and its volatility and a good understanding of how markets work. Day traders also need a good grasp on managing their risks effectively and ensuring that they’re not taking too much risk at once without being able to mitigate it properly. So, if you know what you’re doing and understand how markets work, day trading can be profitable and fun!
Build Balanced Portfolio
The second-best way to invest in cryptocurrencies is by building a balanced portfolio. To do this, you should first set up an investment account with Coinbase or Circle and then transfer funds from your bank account into the account. You can then use those funds to buy different cryptocurrencies on exchanges such as Binance and Poloniex and then sell them later when they have reached their peak value.