So, I have been vanilla trading for a while(Basically HODL). I wanted to learn more about trading types and specialize into them and stumbled upon Derivative market (Options, Futures, forwards, Swaps, CFDs). Wanted to discuss about the pros and cons of learning them. At the moment I'm mainly interested in Options and Futures. What do you guys think? Worth learning? or no? Advantages? Disadvantages?
Derivatives are worth learning if you are a profitable trader. You can minimize your counter party risk with leverage, arbitrage perpetual swap interest rates, exploit contango and backwardation conditions, all sorts of good stuff. You might want to try margin trading on a spot exchange (Bitfinex or Kraken style) first to get a feel for leverage under more familiar conditions. Platforms like Bitmex can be really intimidating if you're new to derivatives.
Great thread about trading BTC options:
https://bitcointalk.org/index.php?topic=5214418.0As you can probably tell, options are immensely more complicated than futures. Futures are just contracts that settle at a future date. In a bull market, they tend to trade much higher than spot. This is called "Contango."
https://www.investopedia.com/terms/c/contango.aspIf you don't want to deal with contango and backwardation and settlement fees, there is perpetual swaps, which use interest rates instead. The more demand, the higher the interest rates longs must pay to shorts. This creates incentive for shorts to take the other side of the trade, and vice versa in bearish conditions. You can "arbitrage" the market by hedging short on Bitmex XBTUSD when the funding rate is positive and simultaneously buying BTCUSD spot. Your net position = zero, but you would be collecting the interest payments on Bitmex.