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What are the potential risks and rewards of selling a call option on a cryptocurrency?

khalique joyoSep 07, 2020 · 5 years ago1 answers

What are the potential risks and rewards that come with selling a call option on a cryptocurrency? How does this strategy work and what should investors consider before engaging in it?

Cryptocurrency
Call Option
Risks

1 answers

  • Hanna ChenFeb 07, 2022 · 4 years ago
    Selling a call option on a cryptocurrency can be a risky but potentially rewarding strategy. When you sell a call option, you agree to sell your cryptocurrency at a specific price if the price of the cryptocurrency reaches or exceeds that price. In return, you receive a premium upfront. This premium can be a significant amount, especially if the cryptocurrency price remains below the strike price. However, there are risks involved. If the price of the cryptocurrency exceeds the strike price, you may be forced to sell your cryptocurrency at a lower price than the market value. Additionally, if the price of the cryptocurrency rises significantly, the potential profit from holding the cryptocurrency is limited to the premium received from selling the option. It's important to carefully assess your risk tolerance and market expectations before engaging in this strategy.

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