PsyOptions Details Bull Call Strategy Spread

The options protocol updated its users about the different strategies available as its launch approaches.

By
Utulu Hope
on
June 22, 2021
Category:
Breaking News

PsyOptions Makes a Bull Call

Decentralized options protocol PsyOptions has dropped details about its Bull Call Spread Strategy. The strategy was termed as “complex” by the protocol. The strategies were detailed in a series of Tweets dropped by the options protocol on June 18th. The protocol released the strategies ahead of their upcoming launch, aiming to stir interest in the complex trading protocol.


What Is An Option? 

As described by Coindesk, an option is defined as a type of derivative contract giving a purchaser the right but not an obligation to buy or sell an underlying asset at a given price or before its expiration. There are two terms associated with options trading: The “call” and the “Put.” The call option is defined as the right to buy the underlying asset, while the put option is the right to sell the underlying asset. In essence, options are like other derivatives that allow traders to speculate on the future price of underlying assets. 


Bull Call Spread Strategy Explained 

According to the PsyOptions Tweet thread, users who think that the price of their assets will go up at a slower rate should use this strategy. Users will use two call options to form a price range with a lower strike and an upper strike to execute the strategy. For instance, if you think the price of SOL will increase a bit in the space of some days or weeks, buy a call option with a strike above SOL’s current market price, including the expiration date you have in mind. As usual, you need to factor in the premium they have to pay. 

Simultaneously, you will set a call option with a strike price higher than the one already purchased. Collecting the premium from selling the call helps offset what you paid for the first option, and the strike marks the upper boundary of the range. 

When executing the strategy, user losses are limited to the net cost of creating the spread. However, their potential gains are also limited. Usually, this strategy is implemented at periods of high volatility. There are two scenarios to expand on how your losses and gains are limited. First, if the price is below the lower strike price upon expiration, one wouldn’t exercise the option, and the premium paid will be lost. On the other hand, if the price is above the higher strike price upon expiration, one would exercise the lower strike option, then the SOL acquired at the higher strike price should be sold. 


What is PsyOptions?

Source

PsyOptions is an options protocol built on Solana’s censorship-resistant blockchain. The protocol is built on flexibility and composability, thanks to Solana, and is entirely trustless. Options are represented as Solana Program Library (SPL) tokens, ensuring that they are traded on decentralized exchanges (DEXes) that support SPL Tokens. 


Closing Thoughts 

PsyOptions explaining options strategies before its launch is a solid way to drive adoption. The protocol has urged its users, especially on Twitter, to stay updated as more strategies will be explained in the upcoming days. Many traders struggle with understanding how complex trading methods operate. Explaining these concepts in a straight-forward manner is positive community engagement by the budding options platform.

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Utulu Hope

UC Hope is a passionate fan of crypto who could weave the latest event into sparks of inspiration and information. He leaves no stone unturned to get to the core of a story. Aside from writing, he spends his hours poring over algorithms and protocols, preparing for a future career as a computer programmer.