Options are a great investment tool, which we covered in an earlier article, to manage risk and generate profit. If you are still unfamiliar with MoonXBT options, refer to our previous article.
So, as we know now, options have limited risk and unlimited profit. However, even though trading is easier because options do not liquidate, there are different types. You need to understand the key factors to maximize your gains.
To keep it simple and easy to understand for our readers, we did not use hard-to-understand professional terms in our previous article. However, the option premium is a key component we need to understand to maximize profit.
For example, if the current price of BTC was $50,000, and you believed a substantial price increase was imminent, you purchased 20 options, which gave you the right to buy BTC at $55,000 in one month.
(All numbers are for illustration purposes only)
The option premium was 2,500 USDT for purchasing 20 options with 50,000 USDT. The option premium is the price of acquiring the option. Easy to understand, but a key factor.
The key factor
Option premium directly affects profit. We can illustrate this with an example:
There are two exchanges with different option premiums. In exchange B, the option premium is 2,500 USDT. In MoonXBT, the option premium is 1,250 USDT, half of that in exchange B.
One month later, the price of BTC increased to $60,000. The profit from exchange B is 10,000 USDT ((50,000/2,500)*(60,000-55,000)), but from MoonXBT, your profit is double ((50,000/1,250)*(60,000-55,000)).
So it is clear that the lower the option premium is, the more you win with your option. Even though our examples are assumed, the fact remains.
MoonXBT has the lowest option premium, half the cost of other mainstream exchanges.