How does shorting a put option work in the context of digital currencies?

1 answers

• Pena StephensFeb 09, 2021 · 4 years ago
  Shorting a put option in the context of digital currencies is a strategy where traders sell put options contracts in anticipation of the price of the underlying digital currency rising or remaining stable. By shorting a put option, traders receive a premium upfront and take on the obligation to buy the digital currency at a predetermined strike price if the option is exercised. If the price of the digital currency remains above the strike price, the option expires worthless and the trader keeps the premium. However, if the price falls below the strike price, the trader may be assigned the digital currency and must purchase it at the strike price, resulting in a loss. Shorting put options can be a way for traders to profit from a bullish or neutral market outlook and potentially acquire digital currencies at a lower cost.
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