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What is the meaning of short put in the context of cryptocurrency trading?

avatarSaurabh MishraJan 14, 2022 · 3 years ago1 answers

In cryptocurrency trading, what does the term 'short put' refer to and how does it work?

What is the meaning of short put in the context of cryptocurrency trading?
Cryptocurrency Trading
Short Put
Options Trading

1 answers

  • avatarJan 14, 2022 · 3 years ago
    In the context of cryptocurrency trading, a short put refers to a strategy where a trader sells a put option on a specific cryptocurrency. This strategy is typically used when the trader believes that the price of the cryptocurrency will either remain stable or increase. By selling the put option, the trader receives a premium upfront. If the price of the cryptocurrency remains above the strike price of the put option at expiration, the trader keeps the premium as profit. However, if the price falls below the strike price, the trader may be obligated to buy the cryptocurrency at the strike price. It's important to note that this strategy carries the risk of potential losses if the price of the cryptocurrency drops significantly.

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