Bespoke strategy construction

Trade options strategies / combos atomically in one transaction

Rysk Beyond enables trading of options strategies, where traders can combine different vanilla options into a strategy that is executed atomically in one transaction.

As an example, a trader can long a 26-MAR-23 $1700 Call and short a 26-MAR-23 $2000 Call to create a call spread, executed atomically in one transaction reducing execution risk and increasing capital efficiency. In this specific case, the long option (26-MAR-23 $1700 Call) plus the difference in strike price ($300) can be used as collateral for the short option (26-MAR-23 $2000 Call) increasing overall capital efficiency vs trading the options stand-alone.

The following strategies are already available:

Credit Spreads

Learn how to trade Credit Spread on Rysk

The goal of a credit spread is to generate a net credit upfront by selling the more expensive option and buying the cheaper option.

Payoff

The net credit received is the maximum profit potential of the trade. The maximum loss for a credit spread is limited to the difference in strike prices minus the net credit received when initiating the trade.

Call Credit Spread

Credit spreads can be constructed using either call options or put options. When using call options, the trader sells a lower strike price call option and buys a higher strike price call option on the same expiry. This strategy is known as a bear call spread and is used when the trader has a bearish sentiment and expects the price of the underlying asset to remain below the lower strike price.

Example

Short Position

Option: ETH 27OCT23 $1700 CALL

Premium: $39.64

Long Position

Option: ETH 27OCT23 $1800 CALL

Premium: $18.87

Credit Spread

Net premium received: $20.77 (short premium - long premium)

Cash collateral required: $100 (long strike - short strike)

Break-even: $1720.77 (short strike + net premium received)

Max loss: $79.23 (long strike - short strike - net premium)

Put Credit Spread

When a credit spread is using put options, the trader sells a higher strike price put option and buys a lower strike price put option on the same expiry. This strategy is called a bull put spread and is employed when the trader has a bullish sentiment and anticipates the price of the underlying asset to stay above the higher strike price.

Example

Short Position

Option: ETH 27OCT23 $1650 PUT

Premium: $47.10

Long Position

Option: ETH 27OCT23 $1550 PUT

Premium: $22.91

Credit Spread

Net premium received: $24.19 (short premium - long premium)

Cash collateral required: $100 (short strike - long strike)

Break-even: $1625.81 (short strike - net premium received)

Max loss: $75.81 (short strike - long strike - net premium)

Debit Spreads

Learn how to trade Debit Spread on Rysk

A debit spread, similar to a credit spread, involves simultaneously buying and selling options contracts with different strike prices but the same expiration date. However, the goal of a debit spread is to have a net long position by buying the more expensive option and selling the cheaper option.

Payoff

This net premium paid (debit) is the maximum loss potential of the trade. The maximum profit for a debit spread is limited to the difference in strike prices minus the net debit paid when initiating the trade.

Call Debit Spread

Debit spreads can be constructed using either call options or put options. When using call options, the trader buys a lower strike price call option and sells a higher strike price call option on the same expiry. This strategy is known as a bull call spread and is used when the trader has a bullish sentiment and expects the price of the underlying asset to rise above the lower strike price.

Put Debit Spread

On the other hand, when using put options, the trader buys a higher strike price put option and sells a lower strike price put option on the same expiry. This strategy is called a bear put spread and is employed when the trader has a bearish sentiment and anticipates the price of the underlying asset to fall below the higher strike price.

Long Straddle

Learn how to trade Long Straddle on Rysk

Feeling the volatility will increase but donโ€™t have a strong opinion in which direction the market will move? A long straddle is your strategy!

This involves purchasing both a PUT and an CALL with the same strike and expiry. The strategy aims to capitalize on a spike in volatility and a significant shift in the underlying spot price, irrespective of the direction.

Straddles are useful when itโ€™s unclear what direction the underlying price might move in, but a spike in volatility is expected

Payoff

The maximum loss for a long straddle is the combined premiums of the two long positions.

While the profit potential is limitless, a movement in one direction before expiration is necessary for potential profitability. The net profit equals the premium received from closing the position minus the premium initially spent on the strategy.

The break-even point for the trade is the sum of the premium paid (CALL premium + PUT premium) above or below the strike price.

Example

ETH price: $1,845

Sentiment: Neutral

Strategy: Long straddle

First Leg: LONG 25AUG23 $1850 PUT

  • Premium: $38.17 (27% IV)

Second Leg: LONG 25AUG23 $1850 CALL

  • Premium: $34.50 (30% IV)

Premium paid: $72.67

Breakeven: below $1777.33 or above $1922.67

Max profit: unlimited

Max loss: $72.67

Long Strangle

Learn how to trade Long Strangle on Rysk

Long Strangle is a similar strategy to long straddle with few main differences:

Payoff

The maximum loss on the trade is defined at entry and itโ€™s the sum of the premium to long the PUT and CALL.

The potential for profit is technically unlimited, though a large move in one direction before expiration is required. Compare to straddle the directional and volatility movement required to be profitable is higher, since the price to enter is lower.

Example

ETH price: $1,845

Sentiment: Neutral

Strategy: Long strangle

First Leg: LONG 25AUG23 $1800 PUT

  • Premium: $16.94 (29% IV)

Second Leg: LONG 25AUG23 $1900 CALL

  • Premium: $18.94 (30% IV)

Premium paid: $35.88

Breakeven: below $1764.12 or above $1918.94

Max profit: unlimited

Max loss: $35.88

Other Strategies

The following options strategies can be constructed on Rysk. Some are already available in the UI, some will be released soon!

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