How Options Protect my SOL

SOL moved up a lot for the past few months, and this was great for us all. However, SOL might be due for a steep correction (I know we all don’t want this to happen) so I had been searching Der*bit, Bin*nce for Options on SOL but in vain. Thankfully I found them on DBOE, a decentralised exchange. With DBOE, we dont need to open an account with all the ID verification hassle. All you need is a DeFi wallet. And DBOE is probably offering the most comprehensive Crypto Options right now.

This is how I shield the decent P&L I made so far.

As a SOL hodler, I am ok to accept a 10% drop in my SOL holding. But technical analysis implies that SOL might drop to $60 (Fib level of ~0.618), I definitely need to hedge out this risk.

There are weekly SOL Options on DBOE, expiring every Friday 3pm GMT time. This is awesome. So I am going to buy Put options with a strike of $80, capped at $65 or Price-Range of protection: $80-$65 and expiry of 2 Feb. Yes! DBOE is listing vertical Option spreads atomically. Example in figure 1

Put or Call

Price Range

Expiry

Amount

Put

(for downside protection)

$80 — $65

2 Feb

xxx

The amount xxx depends on your SOL holding.

For example: if you are holding about 100 SOL (~$8.6K), to have a perfect hedge you should buy 100 Put with a total cost of ~$230. Depending on your market view, you might buy more or less to completely or partially hedge out.

Now, you could sleep well at night because your SOL is being nicely protected while your upside from holding SOL largely remains. Here is why? ( Example in figure 2 )

Good scenario

(SOL jumps to $100)

Bad scenario

(SOL drops to $65)

SOL holding

Value: $10K

P&L: $1.6K

Value: $6.5K

P&L: -$2.1K

Put Options

Value: $0

P&L: -$230

Value: $1.5K

P&L: $1.3K

TOTAL

Value: $10K

Value: $8K

In the good scenario, I am enjoying almost the same P&L (the minus is the money spent on the worthless Put options). In the bad scenario, my portfolio value is $8K, just a slight drop from my initial value of $8.6K. If I don’t buy Put, then my portfolio would be valued at $6.5K only. The best part for this scenario is with the money from the Put Option I would be able to claim $1.5K, I will be able to buy +23 more SOL at $65 each piece.

I will be happy to answer any questions you might have in the Comments. Will go into details of DBOE offerings in my next post.

#SolOptions #DBOE #MWR #PriceRange