Hedgey
Bullish Options Strategies (for buyers)
Bullish strategies
Traders use bullish options trading strategies when they expect the underlying assets to rise in value. When you are bullish on a certain token, you need to have an idea of how much the token price will rise and when you think the rally will occur. Oftentimes people buy a call when they think a token will rise in value, but selling a put (writing a put) is also a possibility.
Buying a call
Traders have multiple reasons to buy a call. But to remain to the point, traders buy a call when:
- They are “bullish” or confident about a token price going up, but they don’t want to lose their money if it dumps instead (risk mitigation)
- They want to utilize leverage to take advantage of rising prices
The graph below illustrates the risk mitigation buying a call offers. Because a call gives you the right to buy a token, a call limits the downside potential to just the premium. You still get all the upside potential without the downside risk. This concept is the key difference with simply buying a token, as you could get stuck with a token that lost significant value if it dumps. A call gives you the option not to exercise it and leave the bag to the call seller.
Summary
You buy a call when you feel bullish about a token, and you want to profit from the token’s value increase while minimizing the downside risks. You sell a put when you believe the token price will rise or remain stable, and you are willing to collect a premium for that bet or when you want to get paid for entering a position.
Last modified 10mo ago
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