Bitcoins come in two categories: cash or nothing and active or nothing. From a cash or nothing bitcoin, the investor will receive a fixed amount of cash when the asset reaches the strike price. The fee for an asset or nothing of a bitcoin is equal to the price of the asset’s value. Once this asset reaches the strike price, it is called “in the money”.
When it comes to trading bitcoins, you must be clear about the exact conditions. For some of the other common forms of financial negotiation, very different terms are used. By way of illustration, a call option is an option that is paid if the price exceeds a certain level on an agreed date. In contrast, a put option pays only if the price is below a specified level.
Planning to trade bitcoins
If you are planning to trade bitcoins, there are two main questions you should ask. The first is the probability that the option will be paid. Secondly, how will this be reflected in the option price. You should know that prices are not how much you initially invested, but rather a ratio that includes the amount paid to get the option and the amount received if you eventually pay. You can think of this in a similar way to fixed odds in gambling.
Another thing to keep in mind is make sure your bitcoins trade is cash or asset related for you to earn bitcoin. If it is cash, the payment will be a fixed amount of money. When a transaction involves assets, the payout is definitely a unit of fixed assets, such as a certain number of shares.
As an investor, you need to check if the bitcoin you are investing in is European or American. Despite the timing, styles are not tied to specific markets. In European style, the price must be above or below the designated level as of the agreed date. In the American style of bitcoins trading, a payout occurs when the price exceeds a specified level at any time prior to and including the agreed date. This will increase the likelihood of earning an American-style bitcoin income, and this will be reflected in the price.
In a European type bitcoin, this simply means that you may end up earning a lot more than you expect, depending on how much the price exceeds the specified level on the agreed date. Always weigh the advantages and disadvantages of both before deciding which one to choose.