Start with the basics. Learn how to express bullish and bearish views with limited risk and asymmetric upside.
Now that we understand how price, time, and volatility shape options, we can begin using them strategically.
The most common place to start is with two simple positions:
- Long Call
- Long Put
These are the cleanest expressions of directional trades using options. They carry a powerful benefit: your risk is capped, but your upside can be much larger.
The Long Call
You buy a call when you expect the asset price to go up.
- You pay a premium up front
- You have the right to buy at the strike price if it is profitable at expiry
- If the price finishes above the strike price, you make a profit
- If the price stays below the strike, the option expires worthless
Your maximum loss is the premium you paid.
Your potential gain is uncapped.
This makes long calls a capital-efficient way to take a bullish view with limited downside.
The Long Put
You buy a put when you expect the asset price to go down.
- You pay a premium up front
- You have the right to sell at the strike price
- If the price finishes below the strike, your put is in the money
- If the price stays above the strike, your put expires worthless
Again, your maximum loss is the premium you paid.
Your upside grows the further the price falls below the strike.
Long puts are a direct way to take a bearish view while still limiting your downside.
When to Use These Strategies
Use a Long Call when
- You expect the asset to go up sharply
- You want leveraged upside
- You want to limit your downside
Use a Long Put when
- You expect a sharp drop in price
- You want to protect against downside risk
- You want to limit your capital outlay
Calls and puts give you directional exposure, with risk you can define in advance.
On Derive
Derive makes these trades easy to execute and analyze.
- Use the options chain to find a strike and expiry
- Open the trade ticket to see your payoff diagram
- View Delta, Theta, and Vega before placing the trade
- Manage risk with full visibility through your portfolio dashboard
Your Action Today
- Choose a strike close to the current market price for BTC or ETH
- Open a call and a put trade ticket on Derive
- Review the cost, payoff, and Greeks
- Think about the scenario in which each position becomes profitable
Tomorrow, we will look at option selling, and what changes when you flip to the other side of the trade.
Coming tomorrow:
Day 10 – Short Call and Short Put: How Option Sellers Get Paid
Hasta manana
Cpt
CptRandlelwa
