Thread by @PowerTradeHQ

1/ Today we saw a good amount of #BTC puts sold. So I wanted to explain how that works and why one might do that.⚡️

This is a short thread on selling puts! 🧵

2/ When you buy a put you are essentially buying insurance incase #BTC’s price starts to tank. This cost a premium, but when you sell a put you collect that premium. We discussed this in our previous thread on buying and selling calls.

https://twitter.com/PowerTradeHQ/status/1433436914149781508

3/ So lets say I sold a put at the 39k strike, what would happen? Well first I would collect the premium from the buyer of that strike, for examples sake, lets say the premium was $100.

4/ The PnL chart below shows what would happen if #BTC price were to move up or down. If #BTC stays above the 39k strike, the option you sold to the buyer becomes worthless, and you simply pocket the $100, but if it drops below the 39k strike you have a good amount of risk.

5/ Remember, the buyer of the strike is buying insurance. If BTC were to drop to 29k the buyer of the put has the right to sell you 1 BTC at the strike price of 39k. Meaning you must buy back at 10k above market price. (The graph doesn't go all the way to 29k 😅)

6/ So if you have a max gain of $100 and huge downside risk potential, why would you do this? Well first off, you might not sell a naked put, you might sell a spread, which would limit your risk (more on that later.)

7/ Secondly, most people who do this are hunting for yield. The idea is that you have a large probability of #BTC expiring OTM (above 39k), basically allowing you to keep the premium you collected. The odds are in your favor, just look at the last monthly expiry for reference.

8/ Check this out, these are all the puts sold in the last 24 hours. These sold puts have a bullish bias. Whoever sold them does not want price to drop below their strike, they want price to stay the same or go up.

9/ Ok, I think I'm going to wrap it up here for now. There is so much that can be said on this topic, but for now I just wanted to get across the basics. We will cover this more in-depth as we go along.

10/ Comment below if you have more to add or any questions!

@AltcoinPsycho @ResearchVariant @tedtalksmacro
@PelionCap @ConvexMonster @GenesisVol @laevitas1 @OrthoTrading @_Dave__White_ @ledger_prime @cmsholdings @tradeparadigm @scottmelker @Mtrl_Scientist @QCPCapital

12/ If you were so inclined to buy or sell some puts, you know where to do it. 😏👇

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