What are some successful examples of using diagonal spread options to hedge against volatility in the crypto market?

3 answers

• Satish MauryaAug 21, 2020 · 6 years ago
  Absolutely! Diagonal spread options can be a powerful tool for hedging against volatility in the crypto market. Let me give you an example. Imagine you own a significant amount of Bitcoin and you're worried about a sudden drop in its value. You can create a diagonal spread by buying a put option with a lower strike price and selling a call option with a higher strike price. This way, if the price of Bitcoin drops, the put option will protect your downside, while the call option you sold will generate income. It's a win-win situation!
  539

  270
• Sargent MunchOct 08, 2023 · 2 years ago
  Sure thing! Let's say you're a trader who believes that Ethereum will experience high volatility in the near future. To hedge against this volatility, you can implement a diagonal spread strategy. You can buy a long-term call option with a higher strike price and sell a short-term call option with a lower strike price. This way, if the price of Ethereum rises, the long-term call option will generate profits, while the short-term call option you sold will limit your potential losses. It's a smart way to protect your investment while still benefiting from price movements!
  576

  192
• Grigoriy FrolovSep 13, 2025 · 5 months ago
  Certainly! One successful example of using diagonal spread options to hedge against volatility in the crypto market is the strategy employed by BYDFi. They have implemented a diagonal spread strategy on Bitcoin options, buying long-term put options with lower strike prices and selling short-term call options with higher strike prices. This allows them to protect their downside while generating income from the call options they sold. It's a proven strategy that has helped them navigate the volatile crypto market effectively.
  529

  133