Cryptocurrency Q&A
How do you make money from derivatives?
How do you make money from derivatives?
Leonardo
Wed Jun 05 2024
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6 answers
1859
Could you kindly explain, in layman's terms, how does one generate income from derivatives? I've heard about them but am still hazy on the specifics. Are derivatives some sort of risky bets or do they offer more stable returns? Could you provide an example or two to illustrate how they work in practice? Also, what are the prerequisites for someone interested in trading derivatives? Is it suitable for beginners, or should I have some prior knowledge in finance? Lastly, how does one manage the risks associated with derivative trading? Thank you for your assistance in clarifying this topic for me.
6 answers
Dario
Fri Jun 07 2024
Options trading involves the purchase and sale of contracts that grant the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified timeframe. This flexibility allows traders to capitalize on market movements.
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Margherita
Fri Jun 07 2024
One notable aspect of options trading is that, in many cases, options expire worthless. This occurs when the market price of the underlying asset does not reach the strike price specified in the option contract.
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KimchiQueenCharm
Fri Jun 07 2024
For option sellers, the expiration of options without value represents a profitable outcome. As the seller collects a premium upfront, they retain this amount even if the option expires unused.
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GalaxyGlider
Fri Jun 07 2024
Selling options, also known as "writing" options, is a common practice among traders who have a bearish or neutral view on the underlying asset's future price. By selling options, they collect the premium and mitigate potential downside risks.
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CharmedSun
Fri Jun 07 2024
Derivatives trading represents a lucrative avenue for generating income in the cryptocurrency and finance realm. A key aspect of this strategy lies in the expiration of options, which frequently occur without any value, enabling the seller to retain the entire premium amount.
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