The basic reason many people invest for the long term in cryptocurrencies is that they believe crypto will continue to prosper into the long term future. This belief is shaken when the market dips and especially when it tanks like during crypto winter. While enthusiasm and fear of missing out commonly drive crypto investment and thus drive prices higher, fear of losing all of one’s investment also causes market panic and pushes prices lower than they otherwise would go in a more rational market. The fact is that for those who invest in cryptocurrencies there are other ways to profit than just by buying and holding or trying to time the market for buying and selling. Here are some thoughts about how to profit from a crypto down market with options.
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What Are Crypto Options?
Options are contracts to either buy or sell an asset such as a cryptocurrency, stock, or futures contract as of a future date at a price specified in the contract. Options come in two flavors, calls and puts. With a call contract the buyer agrees to purchase an asset and the seller agrees to sell it at the contract price also called the strike price. The buyer is paying for the right to buy even if the price of the asset, a cryptocurrency, has gone up significantly. The seller is betting that the price of the cryptocurrency or other asset will not go up. Thus he or she will pocket the premium paid for the contract and the buyer will be out the premium he or she paid. The premium or cost of the contract will vary according to how likely the market believes that the price of the asset will rise sufficiently to earn the buyer a profit. Put contracts allow the buyer of the contract to sell an asset at a future date at a set strike price while the seller is obliger to buy.
Where Can You Trade Crypto Options?
The Chicago Board Options Exchange is where one trades stock options and they also support options trading for Bitcoin and Ether. You can also trade options on the Binance, Bybit, OKX, and other crypto exchanges. In all cases you are well advised to learn about options trading and the various strategies that can be employed to gain profits and avoid losses.
What Crypto Options Strategy Is Profitable In a Down Market?
The simple answer to this question is that you want to buy calls on a cryptocurrency when believe it will go up in price and puts when you expect it to go down. However, professional options traders do not just buy calls or puts as a rule. They mix and match calls and puts in order to limit their risk while seeking profits. These are called spreads.
Bear Put Spread
A bear put spread is when you buy a put contract to sell a cryptocurrency at a higher strike price and sell a put contract at a lower strike price. Both put contracts are for the same cryptocurrency with the same contract expiration date. The premium for the put that you sell will be somewhat lower than the premium for the put that you buy. The this spread start with a small expense which is erased as the market price of the cryptocurrency falls. The maximum profit occurs when the market price falls to or below the lower strike price and the maximum loss occurs if the crypto price climbs above the higher strike price. With this approach the trader is trading off a potentially larger profit for a more secure albeit smaller profit and a limit on any potential loss.
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Bear Call Spread
Similar approach is a bear call spread in which the trader buys and sells puts on the same crypto currency with the same expiration date. In this case the purchased call has a lower strike price than the one that the trader sells. Unlike with the bear put spread the bear call spread starts with a slight credit and has a limited loss if the crypto price rises above the upper strike price.
There are many types of spreads and other approaches to trading crypto options in both down and up markets. The smart trader will learn how to use a few of these and apply them wisely. The best way to start is to only trade in simulation trading using one’s work station software. Do not risk your own money on crypto options trading until you fully understand the strategies you will employ and can routinely make a “paper profit” in your simulation trading.
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Originally published at https://profitableinvestingtips.com on January 12, 2026.
How to Profit from a Crypto Down Market with Options was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.