In the digital currency market, investors often hear about the concept of Bitcoin put options. What does this financial instrument mean? Let's explore it in depth and unveil the mystery of Bitcoin put options.

Bitcoin put options, as a financial derivative, provide investors with an opportunity to profit when the price of Bitcoin falls. Investors buy put option contracts, believing that the price of Bitcoin will fall, and thus sell Bitcoin at a pre-agreed price in a specific time in the future. This strategy can help investors avoid risks when the market falls, achieve the purpose of asset preservation or even profit.

The concept of Bitcoin put options stems from the recognition of market risks and the prediction of future price trends. Investors can hedge their Bitcoin positions by purchasing put options to reduce the risk of losses caused by price fluctuations. This flexible financial instrument provides investors with more options, enabling them to better control the risk exposure of their portfolios.

In actual operation, the operating mechanism of Bitcoin put options is also relatively simple. Investors pay a certain fee as insurance premium when purchasing option contracts. Even if the price of Bitcoin does not reach the pre-agreed price, investors only lose the insurance premium paid. This low-cost and high-yield feature has attracted more and more investors to participate.

It is worth mentioning that Bitcoin put options are not a universal hedging tool. Investors need to carefully assess market risks and their own tolerance when choosing option contracts. Over-reliance on option trading may cause investors to miss market opportunities or even bring greater losses. Therefore, investors should act within their means, make rational decisions, and avoid blindly following the trend when using Bitcoin put options.

In addition, the market for Bitcoin put options also has certain risks and uncertainties. The market fluctuates violently, and investors need to pay close attention to market dynamics and flexibly respond to the challenges brought by price fluctuations. At the same time, regulatory policies, market sentiment and other factors will also affect the effect of option trading. Investors need to remain vigilant and adjust their investment strategies in a timely manner.

In general, Bitcoin put options, as a financial derivative, provide investors with a flexible and diverse investment option. Investors can avoid market risks and achieve the goal of asset preservation and appreciation by purchasing put options. However, investors need to act cautiously and make rational decisions when choosing option trading, avoid blindly following the trend, and avoid unnecessary losses.

In today's turbulent digital currency market, Bitcoin put options provide investors with a unique risk management tool. Investors should treat it with caution, fully understand the mechanism and risks of option trading, and make wise investment decisions. Only on the basis of rational investment can we move forward steadily in the digital currency market and achieve the goal of wealth appreciation. I hope every investor can overcome difficulties and get rich returns in the world of Bitcoin put options.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

Seeing the term Bitcoin put option, the editor of the currency circle believes that many investors are confused. If it is Bitcoin options, many investors know that Bitcoin options are to predict future rises and falls, which is not difficult to understand, but it has obvious advantages over futures contracts. However, only a few investors know about Bitcoin put options, and some investors in the currency circle even heard of the term Bitcoin put options for the first time. So, what does Bitcoin put options mean? The following editor of the currency circle will tell you in detail what Bitcoin put options mean?

 What does Bitcoin put option mean?

Bitcoin put options refer to the right to sell a certain amount of Bitcoin at a specific price (the strike price of Bitcoin options) at a specific time in the future (before the expiration date of the exercise).

Of course, the Bitcoin put options on the JEX platform implement the difference delivery method, so you don’t need to sell Bitcoin to get USDT, but the system directly gives you USDT.

In layman's terms, Bitcoin put options are very similar to insurance.

You buy insurance from an insurance company, and during the insurance period, you enjoy the insurance rights. If something goes wrong, you can find the insurance company to execute according to the insurance policy.

Similarly, if you buy an option from the issuer of the option, you can also exercise your rights according to the Bitcoin option contract (insurance contract) after it expires.

Similarities between the two:

Insurance: After the insurance expires, it is just a piece of waste paper, and the insurance company will not refund the money

Bitcoin put option: Bitcoin put option is also worthless after it expires, and the issuer will not refund the money

Differences between the two:

Insurance: This insurance cannot be sold, the insurance can only be used by yourself, and the insurance company will only fulfill its obligations to the person on the insurance policy

Bitcoin put option: Bitcoin put options can be sold or bought from others

Summary: There is basically no difference, and Bitcoin put options can almost be understood as insurance policies that can be bought and sold.

 Why do options rise and fall?

Not only Bitcoin options, all investment products will rise and fall, which is determined by the supply and demand relationship in the market. The fundamental reason is that value determines price. The potential return of an option is the embodiment of its value, so the potential exercise return should be infinitely close to its market price in the end.

1. Bitcoin options vs. Bitcoin trends

Generally speaking, the price of Bitcoin options follows the price of BTC, that is, if Bitcoin rises sharply, then Bitcoin call options will rise accordingly, and the increase is often greater than BTC. If BTC rises by 10%, BTC call options can rise by 100%+. If Bitcoin falls sharply, then Bitcoin put options will usually rise sharply, and Bitcoin call options will fall sharply.

Why is the increase in Bitcoin options much greater than that of Bitcoin? Because Bitcoin options have leverage, and leverage amplifies the rise and fall of Bitcoin.

2. Bitcoin option profit calculation formula

The calculation formula is as follows:

Call option = (spot strike price on expiration date - exercise price)  the number of purchases specified in one contract

Put option = (exercise price - spot strike price on expiration date)  the number of sales specified in one contract

In this formula, the exercise price is fixed, the quantity is also unchanged, and the only thing that changes is the strike price, that is, the market price of Bitcoin. So the Bitcoin options mentioned above follow Bitcoin (usually, of course there are exceptions), which means this. Let's take 3 examples to illustrate.

Example 1:

There are many users in the market, and their analysis of the market is different. As the market spot price rises, the option price rises, and the option income continues to rise. Users who continue to be bullish, such as
Bob, will buy option contracts at various prices, and the option contracts continue to rise.

The price of option contracts in the market will rise from 1,000 to 10,000.

Example 2: There are many users in the market, and their analysis of the market is different. The spot price drops, which further reduces the option income. Users sell at a reduced price to reduce losses.

The contract price will fall from 1,000 yuan in the market to 500; finally, the spot price soars, resulting in a significant increase in option income, from 500 to 10,000.

Example 3:

Based on Bob’s investment, it can be seen that the rise of spot prices does not mean that options will rise. Options have time limits. Once the time is up, if the strike price is not above the option price, the option will also have no value and its price will become 0; the contract price will slowly fall from 100 to 0.

3. Let's sort out the above content:

1) It is very important to stop loss and take profit when trading options. Options are products with built-in leverage, and the fluctuation range is very large. When the psychological price is reached, similar to Alice, you can stop profit; after reaching the special probability of exercise, you must do a good job of stop loss, such as Alice in Example 3, don't feel bad about cutting losses;

2) Options have time value. The longer the time, the greater the probability of reaching above the exercise price, the greater the probability of the option realizing profit, the slower the option price will fall, and the closer to the exercise time, the closer the option price is to its profit; because the time is long, the spot price is difficult to estimate, and the exercise profit is difficult to estimate; the shorter the time, the spot price will not fluctuate too much, and the basic profit is clear;

3) "'Market price - exercise price'  contract ratio" is the potential exercise profit of the contract. Remember this formula, you can make a more accurate judgment on the option price.

The above is an introduction to what Bitcoin put options mean. The editor of the currency circle kindly reminds that before investors enter the market to invest, they should first understand their financial resources and the risks they can bear, and choose the risk exposure that suits them according to their personal and family circumstances. In addition, investors should always remind themselves to control costs, use diversified diversification methods, supplemented by effective systems, and insist on long-term investment. This is the most reasonable way to effectively deal with investment risks.