Quote from: jmigdlc99 on October 02, 2019, 05:42:49 AM

I'm assuming this "put" option can be done on your "sparrow exchange"? How is "Put" different from shorting a stock and simply selling it now and buying it again at a later time?
I'm not sure I understand the need for additional steps and having an why having a new type of exchange is needed?

I'm thinking this can be simplified like "i sell btc at 9.6k then buy it again at 9k." Does this option mean i get to "bet" 1 whole btc with only $200?

Hello! Thanks for your interest. Here's a short explanation.

Why buy Put?

Unlike spot trading which requires full collateral, buying a Put option allows you to participate in the movement of an underlying asset for a relatively small price (Premium Payable).

This removes the risk of liquidation (which is why it may make sense to buy Put rather than short the market) while allowing you to enjoy leveraged returns.

Buying Put vs shorting

Scenario 1: Unfavorable - BTC/USD rises in value by 20%

BTC/USD price at start: $10,000
BTC/USD price at end: $12,000

If you paid $1,000 Premium Payable to buy a 1 BTC Put position at a Strike Price of $10,000 and BTC settles at $12,000, your risk from the trade is capped to the Premium Payable.

In comparison, if you short BTC and BTC settles at $12,000 from $10,000, your loss will be $2,000 and potentially much worse, depending on how much BTC rallies.

Scenario 2: Favorable - BTC/USD falls in value by 20%

BTC/USD price at start: $10,000
BTC/USD price at end: $8,000

Likewise, if BTC settles at $8,000 from your 1 BTC Put position at a Strike Price of $10,000, you will profit $2,000, which is a 200% return on your $1,000 Premium Payable.

This is as compared to shorting BTC at $10,000. When the price reaches $8,000, your profit is still $2,000, which is a mere 20% return from your $10,000 position. You also risk your whole capital by placing this trade, as compared to buying a Put option where your risk is limited to your Premium Payable.

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