How to Trade Options? Using Bitcoin as an Example (Part 4)

Strategy Introduction:

In the first three articles of this series, we covered what ATM (at-the-money) options, OTM (out-of-the-money) options, and ITM (in-the-money) options are, as well as corresponding strategies for each type based on the market conditions at the time. In this issue, we will discuss practical trading strategies based on current market conditions and how to select option contracts based on market analysis.

Based on the judgment that in the short term, after a small consolidation, there is a high probability of continuing the mid-to-long-term downtrend, the OKX options simulated trading strategy can be:

1. Simply sell ITM (in-the-money) call options that are relatively close to at-the-money. The benefit of selling ITM (in-the-money) options is that the option premium itself is larger. If the market ultimately drops as expected, by expiration date there is a high probability that it will become out-of-the-money or at-the-money and worthless, meaning the larger premium collected when initially selling the option is entirely pocketed. At the same time, due to the uncertainty of short-term volatility range and duration, ITM (in-the-money) call options close to at-the-money experience greater time decay, which gives the seller more opportunities to wait for the market to move in the expected direction.

2. A slightly more advanced approach can be: while buying ATM (at-the-money) put options with a longer expiration date (such as quarterly), simultaneously sell OTM (out-of-the-money) put options with the same expiration date. If the market declines in the medium term as expected, the price of the bought put options will increase, generating returns. If the market remains volatile without declining, the returns from the sold options can offset the time decay of the bought options. Since the expiration date is further out, there are still opportunities to wait for market movements to generate returns.

Some readers may still be confused about calls, puts, buying, and selling—especially those who have previously traded delivery perpetual contracts. Options and contracts are completely different. Buying a call is not simply going long, and buying a put is not simply going short. Let us explain this in detail:

Readers may find the wording awkward and strange—Isn't not going long just going short? Here we need to emphasize that not going long ≠ going short and not going short ≠ going long. Because for the market, it is not only about rising and falling; there is also a period of sideways consolidation. One advantage of options over contracts is that options add a method to profit from sideways markets.

For those who are new to options, the ATM (at-the-money) options that appear by default when opening the options trading page can be a good choice. As shown in the image above, the red box at the top confirms whether it is a call or put option. Clicking the downward arrow next to it allows you to view and select other option types. Finally, the green and red buttons in the middle of the page are for selecting buy or sell. The operation is relatively straightforward. With an understanding of market conditions and by referencing the table above, you can complete a solid options trade. As OKX's options simulated trading is currently in full swing, you can experiment freely without worrying about any actual losses.

For those with some experience, how to select the strike price may be a bigger question. Here is a brief explanation, as shown below:

For example, if Bitcoin's current price is 7,000, and Xiao Ming believes that Bitcoin will not rise above 7,000 within the next week, then according to the table above, selecting to sell "BTCUSD-This Week-7000-C" expresses Xiao Ming's market expectation. If the market indeed stays at 7,000 for a week as Xiao Ming expected, then the entire premium received when selling the option is profit.

By now, doesn't trading options seem incredibly easy? Then seize the opportunity to try it on OKX's simulated trading platform~

Disclaimer

This article may contain product-related content not applicable to your region. This article is committed to providing general information only and does not accept responsibility for any factual errors or omissions. This article represents the author's personal views only and does not represent the views of OKX. This article is not intended to provide any advice, including but not limited to: (i) investment advice or investment recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets (including stablecoins) involves high risk and may experience significant volatility or even become worthless. You should carefully consider whether trading or holding digital assets is appropriate for you based on your financial situation. For questions specific to your circumstances, please consult your legal/tax/investment professional. The information contained in this article (including market data and statistics, if applicable) is for general reference purposes only. Although we have taken all reasonable precautions in preparing such data and charts, we do not accept any responsibility for any factual errors or omissions expressed herein. © 2025 OKX. This article may be reproduced or distributed in its entirety, or excerpts of 100 words or less may be used, provided that such use is non-commercial. Any reproduction or distribution of the full article must prominently state: "Copyright © 2025 OKX, used with permission." Permitted excerpts must cite the article title and include attribution, for example, "Article title, [author name (if applicable)], © 2025 OKX." Some content may have been generated or assisted by artificial intelligence (AI) tools. Derivative works and other uses of this article are not permitted.

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