For those in the finance sector, spot and futures trading are familiar concepts. They often pave the way for each other, and options trading is the latest and most optimized form, addressing the two primary concerns: profit and risk.
SPOT TRADING
Spot trading is the most basic form of trading with the concept of immediate transactions—essentially, it's an exchange of money for goods or vice versa. It's akin to buying and selling a commodity.
Example: You buy Coin A at $5. After market fluctuations, Coin A increases to $10. You sell immediately and make a $5 profit (or vice versa if the price drops).
FUTURES TRADING
In theory, futures contracts are agreements to trade a specific asset at a future date for a predetermined price. The key difference from spot trading is the high leverage involved; you only need a small amount of capital, but the potential profits (or losses) are significantly magnified (e.g., x5, x10).
Example: A futures contract A is worth $100, and the platform allows 10x leverage. You only need to put up $10 to buy the futures contract (this $10 is collateral). If the contract value increases by 10% (to $110), your profit doubles your initial capital. However, if it decreases by 10% (to $90), your account is immediately wiped out (you lose the entire collateral).
While it seems like a 50/50 chance, in practice, the high volatility often leads to rapid losses, especially during market fluctuations.
OPTIONS TRADING
Options were created to reduce the high risks associated with futures trading while still providing stable profits (spot trading is less volatile but offers lower returns). With options contracts, you predict the future value of assets like coins A, B, etc., at a specific future time without needing to buy or sell them directly.
Example: Suppose on August 16th, the current price of BTC is $1850. Person A sells a Call option for ETH—1608—$1850—C. This means person A commits to selling ETH at $1850 on August 17th, regardless of the actual market price. Person B buys this option for a volume of 0.01 ETH and pays a premium of $10 to person A.
While options trading is popular globally, it's still relatively uncommon in the Vietnamese market. This might be due to the extensive knowledge required or misinformation causing hesitation among potential traders.
In my personal opinion, options trading represents the future of the current crypto market. I created this group for official options traders to exchange knowledge, ideas, and stay ahead of the trends.
Conclusion
While each trading method has its pros and cons, understanding them thoroughly can help you make more informed decisions and better manage risks and profits. Happy trading!