A trader just learned the hard way how volatile cryptocurrency actually is. The trader lost more than $3 Million on a single trade in the crypto options market.
The trader was the victim of the market drop that happened last week when the prices of Ether fell to a 3 month low of $1700. The trader had taken a huge bet against a sharp drop which actually happened.
Gregorie Magadini the CEO of an options analytics platform Genesis Volatility said while explaining the trade:
“The market moved just enough to force the trader to take a loss by buying back 5,000 contracts of the December expiry $2,560 put option sold earlier this quarter,”
What is a Put Option?
A put option allows the owner of an asset to sell the asset at a set price on a certain day, or a date. The person who holds the option makes money when the price falls, he’s basically short the asset. While the seller makes money if the price of the asset increases.
The trader in question sold the options when the price was $2,560 expecting the bull run to continue till the end of the year. However, the bull run peaked at $4,000 in May, and fell to $1,700 on Tuesday. This caused a huge loss to the seller.
The trade was done on Deribit, one of the world’s largest crypto options exchange platforms. The seller sold 5000 contracts for $2.235 million. However, he had to purchase them back for $5.44 million incurring a loss of $3.2 million.
This is a heavy loss however, the trader bled through the loss to stop any further losses.
