Options AI
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    • πŸ”˜Buying Options
      • ☸️Bullish Options
      • ☸️Bearish Options
      • ☸️High Volatility Options
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  • Put Options
  • How Put Options Work:
  • Advanced Strategies
  • Strip Strategy
  • Bear Put Spread
  • Bear Call Spread
  1. Trading Strategies
  2. Buying Options

Bearish Options

PreviousBullish OptionsNextHigh Volatility Options

Last updated 6 months ago

Bearish options are used by traders when they expect to see a decrease in the asset price.

Options AI offers four different types of bearish options:

  • Put

  • Strip (Classic Strategy)

  • Bear Put Spread (Classic Strategy)

  • Bear Call Spread (Inversion Strategy)

Put Options

Definition: A put option is an on-chain contract that gives the buyer the right, but not the obligation, to sell ETH or BTC at a fixed price during a certain period.

How Put Options Work:

  • The buyer chooses the size, period, and strike price for the option contract.

    • Size: Number of option contracts being acquired.

    • Period: Number of days the contract will be active.

    • Strike Price: Pre-determined price at which the buyer can sell the asset.

  • The premium is calculated based on the chosen parameters, and the buyer pays this amount in USDC.e using their wallet.

  • Upon payment, the buyer receives an ERC721 option token representing the purchased option.

  • The buyer can exercise the put option during the selected period using the ERC721 token.

  • Outcome: If the price of the asset falls below the strike price, the buyer profits. If it does not, the option expires worthless, and the seller keeps the premium.

Exercise Process:

  • The buyer sends the ERC721 token to the protocol to exercise the option and receives the profit in USDC.e.

  • The contract must be exercised before the expiration time, provided the price is below the strike price.

Available Periods and Strike Prices:

  • Periods: Ranging from 7 to 90 days.

  • Strike Prices: ATM (current market price) and three OTM prices:

    • Market Price - 10%

    • Market Price - 20%

    • Market Price - 30%

Example:

  • Market price of ETH: $2,337.

    • OTM Strike #1: $2,103

    • OTM Strike #2: $1,869

    • OTM Strike #3: $1,636

Advanced Strategies

Strip Strategy

  • Structure: One call option and two put options with the same strike price and expiration.

  • Profit Potential: High profits if the price falls sharply, reasonable profits if the price rises.

  • Use Case: Betting on rising volatility with a bearish bias.

Bear Put Spread

  • Structure: Buying an ATM put option and selling an OTM put option with a lower strike price.

  • Profit Potential: Decent profits if the price falls to a certain level with lower cost than an ATM put.

  • Use Case: Betting on a moderate price drop.

Bear Call Spread

  • Structure: Selling an ATM call option and buying an OTM call option with a higher strike price.

  • Profit Potential: Profits if the price stays the same or falls, with immediate profit potential after purchase.

  • Use Case: Betting on a stable or falling price without waiting for a drop.

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