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Exam: Mastering Risk in Crypto Options

If the underlying asset stagnates in price the option's value erodes as time passes, resulting in potential losses.

Theta represents time decay, meaning that the value of the options rises as time passes, assuming all else is equal.

If all else is equal, Theta results in a rise in Delta as time passes.

What is the main implication of Theta for long calls and long puts?

The short straddle benefits from significant price movement. If price stagnates, the position erodes in value.

The primary risk for short straddles is significant price movement in either direction.

The primary risk for short straddles is stagnant price action.

What is the main risk for short straddles?

Rolling over and giving up on price action.

Changing, or "rolling" every leg of an options strategy to further in-the-money strike.

Changing, or "rolling" the leg of a strategy to a further out-of-the-money strike or to a further expiration date to keep the position open.

What does it mean to "roll" a short straddle strategy?

Depending on the situation, understanding skewness is near useless in crypto options.

Understanding and analyzing skewness and the implied volatility surface can provide an edge in frontrunning news traders.

Among other things, the implied volatility surface can provide insights into market sentiment, whereas pronounced skew towards calls or puts can indicate bullish or bearish sentiment, respectively.

What benefit does skew and volatility analysis provide in options strategies?

Long puts provide exposure to the upside of an underlying asset, whereas long put spreads provide exposure to the downside.

The spread reduces overall cost while also potentially reducing overall profit. Generally, the long call spread is used when moderately bullish, while a plain long call is used when extremely bullish.

The spread reduces overall profits without giving much in return.

What are the primary differences between using a long put and a long put spread?

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Exam: Mastering Risk in Crypto Options

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