How does a put option on a digital currency behave when it expires in the money?
Glow-codingDec 14, 2021 · 3 years ago5 answers
Can you explain the behavior of a put option on a digital currency when it expires in the money? What happens to the value of the option and how does it affect the holder and the writer of the option?
5 answers
- Dec 14, 2021 · 3 years agoWhen a put option on a digital currency expires in the money, it means that the strike price of the option is higher than the current market price of the digital currency. In this scenario, the option holder has the right to sell the digital currency at the strike price. The value of the put option increases as the market price of the digital currency decreases, allowing the holder to profit from the price decline. On the other hand, the writer of the option is obligated to buy the digital currency at the strike price if the option is exercised. The writer's loss is limited to the difference between the strike price and the market price, minus the premium received for selling the option.
- Dec 14, 2021 · 3 years agoWhen a put option on a digital currency expires in the money, it's like hitting the jackpot for the option holder. They have the opportunity to sell the digital currency at a higher price than the current market value. This can be a great way to make a profit if the market price of the digital currency drops significantly. However, for the writer of the option, it can be a bit of a headache. They are obligated to buy the digital currency at the strike price, which could result in a loss if the market price is significantly lower. So, it's a win for the option holder and a potential loss for the writer.
- Dec 14, 2021 · 3 years agoWhen a put option on a digital currency expires in the money, it means that the option holder can sell the digital currency at a higher price than the current market value. This gives the holder the opportunity to make a profit by selling the digital currency at a higher price than they bought it for. However, for the writer of the option, it means that they have to buy the digital currency at a higher price than the current market value. This could result in a loss for the writer if the market price of the digital currency drops significantly. So, it's a win for the option holder and a potential loss for the writer.
- Dec 14, 2021 · 3 years agoWhen a put option on a digital currency expires in the money, the option holder has the right to sell the digital currency at the strike price. This can be advantageous if the market price of the digital currency is lower than the strike price, as the holder can sell the digital currency at a higher price than the market value. On the other hand, the writer of the option is obligated to buy the digital currency at the strike price, which could result in a loss if the market price is significantly lower. So, the behavior of a put option when it expires in the money depends on whether you are the holder or the writer of the option.
- Dec 14, 2021 · 3 years agoWhen a put option on a digital currency expires in the money, the option holder has the right to sell the digital currency at the strike price, which is higher than the current market price. This allows the holder to profit from the price difference. The value of the option increases as the market price of the digital currency decreases, providing the holder with a greater profit potential. On the other hand, the writer of the option is obligated to buy the digital currency at the strike price, which could result in a loss if the market price is significantly lower. So, the behavior of a put option when it expires in the money is favorable for the holder and potentially unfavorable for the writer.
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