As this Banking Crisis continues to unravel & expand across the globe, everyone is, unsurprisingly, anticipating CBs to accommodate these blowups.
A return to easy money would likely also mean a return to super-charged asset inflation
This has many people reaching for leverage…
But Beware ☟
σ Your dreams of going to the moon can QUICKLY turn into nightmares of liquidation if you misuse leverage.
This is especially true in crypto, where margined futures often get the bulk of the volume rather than options.
But it’s best to heed the advice of folks like @lightcrypto on Twitter ↴
This old tweet came to my attention by a sub the other day, and I can’t help but elaborate on it.
σ As a seasoned options trader, I must say @lightcrypto hit the nail on the head.
It’s always great to see valuable knowledge being shared around the trading community.
The advantages of replacing high-leverage margin swap/futures positions with options is something I’ve preached for a long time.
Especially to those in crypto markets.
For those who might not fully grasp the concept or need a refresher, here you go!
➠ HIGH-LEVERAGE TRADING: A DOUBLE-EDGED SWORD
σ When trading with high leverage in margin swaps or futures, you’re essentially borrowing capital to amplify your position.
While this can lead to higher returns, it also magnifies the risks involved.
In highly volatile markets, traders can easily get liquidated if the market moves against their position.
σ Typical Behavior:
• Chase the rally
• Go margin longing AFTER big moves
This tends to be a recipe for disaster.
High leverage + late entry = liquidation perils on pullbacks
σ Focus on timing, managing risk, & using leverage wisely.
That’s how we option traders play the game.
σ Options provide a more controlled way to manage risk while still getting leverage to your capital.
Traders can limit their downside risk while maintaining exposure to the potential upside.
This is possible because options give you the right, but not the obligation, to buy (#call options) or sell (#put options) an underlying asset at a specified price (strike price) on or before a specific date (expiration date).
Thus, by paying a premium, traders can secure the right to buy or sell without the same degree of risk that comes with highly leveraged margin positions.
σ Additionally, options can offer more flexibility in terms of strategies.
Such as hedging and generating income from existing positions.
This can prove to be a more sustainable and less risky way to navigate the markets.
Especially during times of heightened volatility.
σ Once again, kudos to @lightcrypto for highlighting this crucial point.
Keep up the great work, and remember…
Be wise, strategize, and don’t let FOMO dominate.
➠ Want to hear more about our thoughts on what’s going on with all of these banks collapsing?
Watch today’s Macro Options Spotlight below!
You’ll also see:
• Recap of recent price action
• Today’s Cross Asset #Vol Summary
• #EUR Strength is on Borrowed Time
• EUR #Volatility Dashboard & $FXE Trade Idea
Has this inspired you to take your options education more seriously?
If so, we’ve got the perfect options trading courses for you in partnership with some of our favorite people in finance!
➠ For true beginners, head to Real Vision Academy for the perfect options primer – and in laymen’s terms!
➠ Are you ready for a bit more? Spotgamma’s 3-part series, The Hedge, is the place for you.
Head over to their respective sites right now to check them out.
Thank you for making it this far!