I'm not the most financially savvy trader out there, but can I confirm a few things with everyone to see if I'm on the right track?
- Futures: A contract you enter in within a marketplace to agree to buy or sell an asset at a future point in time. Legally binding/are obligated to execute the trade. I.e. Betting that the price of a commodity or stock will go up or down.
- Options: Same as above, but you don't have to commit (on either the buy or sell side)
- Swaps: Swapping one asset for another i.e. gold for oil, Tesla stock for Apple stock
3 Questions:
- Is my understanding right?
- What is the point of Options if someone can just pull out when the conditions don't favour them at that future point in time?
- Why would someone use swaps instead of simply buying the asset directly after selling the one they don't want?
- What is the rationale for futures/options in crypto, when it's so volatile to begin with and no real event (mostly) moves the market in a logical way? Like the crypto markets don't work independently from each other. If Bitcoin goes down, then everything goes down even though those other projects are unrelated.
Any help/guidance would be massively appreciated. I'm trying to understand the rationale behind a crypto trader using sophisticated trading techniques on an asset that doesn't have any real, tangible markers for said direction of the price.
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