1/ Lesson 2: Options are a fundamental risk management tool because they allow for hedging against both directional movements (did the price go up or down) and volatility (how far prices move from central avg) of the underlying asset (Eg. ETH / stocks /bonds)
3/ The buyer of a put option is better off the more the value of the underlying asset crashes. Thus the buyer of a put option believes that there will be downward movement or high volatility in the underlying asset, hence is “long volatility + short the underlying asset”.
5/The seller of a put option is worse off the more the value of the underlying asset crashes. Thus the seller of a put option believes that there won’t be downward movement or high volatility in the underlying asset, hence is “short volatility + long the underlying asset”.
7/ The buyer of a call option is better off the more the value of the underlying asset increases. Thus the buyer of a call option believes that there will be upward movement or high volatility in the underlying asset, hence is “long volatility + long the underlying asset”.
9/ The seller of a call option is worse off the more the value of the underlying asset increases. Thus the seller of a call option believes that there won’t be upward movement or high volatility in the underlying asset, hence is “short volatility + short the underlying asset”.
10/ That’s all for today
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