Quote from: bitgolden on June 25, 2020, 02:51:40 PM

Quote from: Sparrow Exchange on March 12, 2020, 09:09:04 AM

Hedging is a trading strategy to reduce or eliminate the risk of holding one position by taking on another position.

One simple example is to compare it to insurance, which is basically a form of hedging.

You are trying to emphasize about option trading which maybe or may not be similar to insurance; but I like to appreciate you for your cross thinking.

In the insurance, I will pay premium regardless of I will be happened to make a claim or not. If there will be no situation for me to make a claim then I will be happy because I stayed secured with the thoughts of I could get chances to recover my losses up to 70% to 90% if anything bad happens. Premium is the fee for having faith on recovering losses.

How exactly option trading works here? If market reacts as per my PUT/CALL then I will get profits if not I will lose. If the risked amount is compared to premium how you will compare the situation with insurance on the event of profitable option trading? I am just trying to think your way but I could not.

Maybe this article from Sparrow Blog will help you.

Alternatively you could join our telegram if you have any questions about Options trading or news about Options or crypto in general..