Should You Buy or Write Call Options on Coinbase? My take on the Spread of This Great Option Chain
Should you buy or write call options on Coinbase? Well you can find the option chain for Coinbase here, that’ll give you a guide for essentially what we’ll be talking about in this blog post. https://www.nasdaq.com/market-activity/stocks/coin/option-chain NASDAQ and their website have the best option chain by far. Here I’ll show you how I plan to write call options, as well as what you can do to cover yourself, and what your Margin allowance is likely going to be if you want to write naked options on the stock, or if you want to size up a significant portion of long call options, and the risks and rewards of each strategy. I have been actively trading options for several years now, and have been learning about them for nearly half a decade, the options market is something that is near and dear to my heart and I am happy that I can move that knowledge forward to my now loyal readers! Thanks again for coming and be sure to read on or subscribe to our blog for additional details and information on all things options!
Other options and margin strategies that we’ll be covering on this blog include:
Short selling, how it is and why it works
The risks of selling short a stock
margin buying long securities, like leveraging the S and P 500
How leveraged ETFs work, 3X Short leveraged ETFs on the Russell 2000 etc.
How to write and buy options on Bitcoin
When you should trade options
When you shouldn’t trade options
The best Finance Programs and online education platforms for exactly how options work and how to trade them.
And more, be sure to read on or subscribe for more information!
What Does The Option Chain for Coinbase Look Like
I’ve got to say that the option chain for Coinbase is extremely interesting, one of the healthiest I’ve ever seen so far in a security. Your ability to make money when trading options is determined by the assets volatility and this is largely determined by the amount of speculation surrounding the stock. Bitcoin and Coinbase stock are highly correlated, and so this is just simply a speculative vehicle, even though it’s got decent fundamentals as well. We do see however that so far, Coinbase and it’s volatility has mirrored the movements of Bitcoin by about 83%, this is strikingly similar, though as we move forward I would expect this to get watered down more as Coinbase starts to get a P/E ratio and stand alone by itself as a company.
Here’s When You Should Buy Calls on Coinbase, Why I Like This Strategy The Most
Writing calls on Coinbase might look like a good deal, especially those weekly call options as you can probably get a $100 per month premium on just one round lot of shares. However, with the extreme volatility of cryptocurrency, these could easily go against you, and even on covered call options you will be paying heft tax fees often as Bitcoin has upward spikes. There’s also just the risk itself that you’re buying Cryptocurrency and that the thing has no underlying value and could basically plummet to zero. Buying calls however, is a lot less risky in that all you can lose is the premium that you paid for the contract. It is also a great way to get a huge spike in your capital in that all it takes is one good volatility spike for you to get a huge amount of capital. In this case, panning for gold is actually less risky than selling shovels!
What Writing Calls on Crypto Looks Like, Why I Would Never Write Naked Calls on Bitcoin or Coinbase, It’s a Recipe for Disaster?
With the above being said, I never plan on writing naked calls on Coinbase or Crypto, due to its extreme, inherent underlying volatility, however I would probably write covered calls, just not as often as I would buy calls. The combination of using options and Cryptocurrency is a type of high risk high reward strategy, and while not nearly as risky as NFTs when you really look at it, this is still a high risk strategy, especially when you consider the fact that people actually buy bonds and money market accounts with their capital and you’re over here buying calls on Coinbase!
Can You Purchase Options on Ethereum?
You can, but it is much riskier, even just from a tax standpoint than using an underlying stock with a high correlation like something like Coinbase would offer you. You can do this even just by opening up a Cryptocurrency account on Fidelity and by writing options off of your underlying position. You can also purchase options on the cryptocurrencies once you have an established Crypto account setup with a major brokerage. Something like Coinbase however, while good for trading Bitcoin, is not good for something like this as they do not offer options contracts.
Final Thoughts On Should You Buy Or Write Call Options on Coinbase?
This is an extremely high risk strategy, so definitely use with caution. That being said if you cover yourself and you only invest what you can afford to lose here you can definitely make money with this if you know what you’re doing. For more details and information on all things business and finance, read on or subscribe to our blog for additional details and information.
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