How Can an Options Contract Be Used to Hedge the Risk of Holding the Volatile Token? ▴ Learn

How Can an Options Contract Be Used to Hedge the Risk of Holding the Volatile Token?

An investor holding the volatile token can purchase a put option on it. A put option gives the holder the right, but not the obligation, to sell the token at a specified strike price.

If the token's price crashes (due to mass stablecoin minting/issuance), the put option increases in value, offsetting the loss on the volatile token holding.

What Is a ‘Put Option’ and How Does It Differ from a Call Option?

Define the Difference between a Call Option and a Put Option

What Financial Derivative Could Be Used to Hedge against the Risk of a PoS Governance Attack?

What Is the Primary Difference between a Call Option and a Put Option?