Traders commonly use protective puts as a form of “insurance” on their bitcoin holdings by limiting downside risk in the short term. Protective puts are typically used to hedge against a potential drop in bitcoin’s price. Traders can remain long bitcoin with the option to sell their bitcoin at the strike price if the price of bitcoin declines.
Protective Put = Long bitcoin + Long put option
Trading Protective Puts
- Select the put option you want to trade on the options chain
- Enter the number of contracts
- Review or Edit the Price. The top ask is the current lowest price you pay to buy the option
- Press Buy/Long and review your order