Options Trading Essentials Series
Imagine being offered the chance to buy event tickets at today’s price, even though the event is months away. You pay a small fee for the option to buy, but you’re not obligated to commit. As the event date approaches, ticket prices might skyrocket. If they do, you can purchase at the original price and benefit from the difference. If prices drop, you lose only the fee, as you’re not required to buy the ticket.
This concept mirrors the flexibility of options trading on Stryke, where you can capitalise on market movements without fully committing upfront. It’s a powerful way to manage risk and speculate on price changes with minimal capital exposure.
Understanding Options on Stryke
Stryke’s platform allows you to trade options on a variety of tokens, including WETH, WBTC, and others. The core idea is that you have the right—not the obligation—to buy or sell an asset at a specified price (the strike price) before an expiration date.
Whether you’re aiming to hedge against potential losses or speculate on price movements, Stryke provides tools to support calculated, lower-risk trading decisions.
Key Concepts: How It Works on Stryke
Types of Options (Call vs. Put)
Call Option
A call option lets you buy an asset, like ETH, at the strike price before the expiration date. If you believe ETH’s price will rise, buying a call can help you benefit from that increase.
Put Option
A put option gives you the right to sell the asset at the strike price. If you think ETH’s price will drop, buying a put option will yield profit from that decline.
On Stryke, you don’t need to hold the underlying asset to use these strategies, offering greater flexibility and reduced risk.
Visualising Stryke's Platform Features
Stryke’s intuitive platform is designed to simplify options trading. Whether you are selecting tokens for trading, monitoring liquidity, or estimating potential profits, the interface provides all the tools you need in one place. Below is a detailed walkthrough of key features that make trading on Stryke both accessible and efficient.
- Tokens List: Easily browse and select tokens like WETH, WBTC, ARB, and others for options trading. The dashboard shows each token's relevant details, ensuring you make informed choices.
- Liquidity and Utilisation: Keep track of trading activity and token liquidity in real time. This helps you assess market dynamics and potential opportunities before making a move.
- Reward Gauges: Stay updated with active liquidity incentives through the reward gauges banner. Incentivised gauges add another dimension of earning potential for traders and liquidity providers.
- Sidebar Tabs: Navigate seamlessly between key features like trading, staking, gauges, and more using simple sidebar tabs.
- Options Chain and Chart Section: Analyse price trends and view detailed options data for both calls and puts. This feature empowers you with critical insights for selecting strike prices and building your trading strategy.
- Expiry Settings and Profit/Loss Calculator: Choose your preferred expiration period and estimate potential profits or losses before confirming trades. These tools enhance decision-making by giving you a clear understanding of your risk and reward.
Strike Price, Expiration Date, and More
- Strike Price: The price at which you can buy or sell the asset (e.g., ETH, BTC) through the option. Selecting the right strike price is key to maximising potential profitability.
- Expiration Date: The deadline by which you must decide whether to exercise the option. Stryke displays expiration dates clearly, helping you manage your positions effectively.
- Moneyness: This shows an option’s relationship to the current market price:
- At the Money (ATM): The strike price is close to the current market price.
- In the Money (ITM): The option would be profitable if exercised now (e.g., a call with a strike below ETH’s current price).
- Out of the Money (OTM): The option is currently unprofitable if exercised (e.g., a call with a strike above ETH’s current price). OTM options are often cheaper but require a larger market movement to become profitable.
Understanding moneyness helps you assess each option’s risk and reward, allowing you to align your trades with your market outlook.
Why Trade Options Instead of Perpetuals or Spot?
Options offer unique benefits for managing risk and flexibility:
- Limited Risk: With options, your maximum loss is limited to the premium you pay. This caps your downside risk, whereas perpetuals and spot trades expose you to full market volatility.
- No Liquidation Risk: Unlike perpetuals, which involve leverage and can lead to forced liquidation, options won’t be forcibly closed by the market, making them safer in volatile conditions.
- Strategic Flexibility: Options enable diverse strategies, such as hedging or profiting from market swings without significant capital outlay. This flexibility is particularly useful in volatile markets.
For Liquidity Providers (LPs)
Liquidity Providers (LPs) on Stryke play a vital role in facilitating options trading by depositing assets into liquidity pools. These pools allow traders to execute options while LPs earn fees from trading activity. By providing liquidity within specified ranges, LPs can optimise capital efficiency and enhance their returns. This setup offers LPs a steady stream of passive income while contributing to the platform's overall liquidity.
For Traders
Traders on Stryke gain access to a user-friendly platform to trade options on a wide range of tokens. The platform is designed to simplify the trading process, offering analytical tools to help traders evaluate risk, select strike prices, and manage their positions effectively. Whether new to options or experienced in the market, traders can leverage Stryke's features to tailor their strategies and explore trading opportunities confidently.
With options, Stryke allows you to manage market exposure efficiently without needing to hold or sell assets directly. You can benefit from price movements in ETH, BTC, and other tokens with lower capital at risk, while Stryke’s user-friendly platform guides you every step of the way.
Ready to start trading on-chain options? Head over to our docs for everything you need to know about getting started on Stryke.
About Stryke
Stryke is a decentralised options protocol that focuses on maximising liquidity and enhancing gains for option buyers while minimising losses for option writers—all in a passive approach.Stryke employs option pools that enable anyone to effortlessly earn yield. The protocol provides value to both option sellers and buyers by ensuring equitable and optimised prices for options at various strike prices and expiries, achieved through our proprietary, cutting-edge option pricing model designed to mirror volatility smiles.
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