☸️Bearish Options

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.