Crypto options trading is gradually emerging as a popular alternative investment strategy for traders who wish to diversify their portfolios and make profits in a declining market. For beginners, a crypto option is a contract that provides the holder with the right to buy or sell a particular amount of cryptocurrency at a pre-fixed price and time.
Its advantage is that you can benefit from crypto market movements without owning the underlying asset. But, how exactly can you benefit from crypto market volatility? To begin with, you should clearly define your financial goals and risk measures.
Learn to benefit from market volatility.
<h2>How to Use Market Volatility to Your Advantage? </h2>
Price movements can seem frightening to beginners but it’s a part and parcel of crypto trading. Trading in a volatile market can seem overwhelming and highly risky, but you need to know how to take advantage of it. How? Check these points below: 
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<li aria-level="1">Formulate Goals and Risk Measures </li>
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Remember that the crypto market never sleeps, i.e. it is famous for being volatile. So, you must set proper financial goals and predefine your trading strategy. Decide on your measures to reduce risk as necessary. Moreover, stick to your decisions; it’ll help you remain impartial amidst crypto market volatility.  
Avoid trading very aggressively when you’re short-selling in a volatile market. It’s a good idea to define your financial goals as a comparative percentage of your current holdings. 
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<li aria-level="1">Target Market Trends After Proper Analysis </li>
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You can benefit immensely by getting your timing right. First, maintain a razor-sharp focus on the trending cryptocurrencies in the market. When you find a selected token trending upwards, wait for a sudden price decrease. Then, enter into a sale just before its value increases.
While it’s true that there may be a fast decline, it can net you quick profits if you get your timing right. Strategies like straddles and strangles are popular options for dealing with crypto market volatility. 
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<li aria-level="1">Review Your Short-Term Trading Strategies </li>
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Once you have set a profit target in percentage, consider exiting your positions in parts. For instance, when the value increases slightly, you can consider selling off one-third of your position. Hold the rest and wait for a better opportunity. Don’t get disheartened if it doesn’t arrive because you will still have made a small profit.
Consider setting a tight trailing stop. It’s set at a different price or percentage than the current market price of the underlying cryptocurrency. If the trailing stop is set at a lower price, it keeps your positions open for a longer time. On the other hand, if it’s set at a higher price, your positions will close quickly preventing losses from a sudden movement. 
Setting stop losses is just as important as profit targets, if not more. Don’t forget that despite day trading working best for crypto market volatility, there may be times when you are unable to monitor trades. That is why you must set take-profits and stop losses are a must.
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<li aria-level="1">Buy at Breakout Stages</li>
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In the initial stages, most traders will not be eager to invest in a particular crypto option. But they’ll lose all resistance once the price of the security moves up. You can consider selling your crypto option at this time, i.e. before the breakout loses its momentum. It would be beneficial for you because there’s a high potential to make profits at this time. 
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<li aria-level="1">Keep Yourself Updated </li>
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Make sure you are up-to-date about the new market developments. Turn on the notification buttons of each financial application on your phone. Before you make trading decisions, evaluate new data mandatorily. Read up on the latest articles on cryptocurrencies. 
Despite the high volatility of the crypto market, the importance of fundamentals remains unchanged. That is why the best crypto options tip is to stay informed.
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<h2>Why Is the Crypto Market So Volatile? </h2>
If you are a new trader, you may be wondering why the crypto market is so volatile. Here are the reasons: 
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<li aria-level="1">They Are Relatively New </li>
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The most important reason for crypto market volatility lies in their newness. Though cryptocurrencies are globally prominent, as an asset class, they were unable to become as popular as traditional assets such as gold or equities. Crypto trading remains highly speculative in the absence of concrete rules. Speculative bets lead to high market volatility. 
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<li aria-level="1">Absence of a Controlling Agency </li>
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There’s no controlling or regulatory agency like fiat currencies or traditional assets. No regulatory framework has been formed in India to monitor and interfere with the market. While such anonymity and lack of central authority lead to the attraction of the crypto market, it also makes it highly volatile.
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<li aria-level="1">Major Holdings and Limited Supply </li>
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One or a small group of investors hold most of the coins for many cryptocurrencies. These people are referred to as whales. If these whales maintain their positions for a long time, it will lead to volatility in the market. This is primarily because holding a position stagnant for a long reduces the liquidity of an asset. 
Now, suppose whales sell off a bunch of their cryptos at once. It will lead to the shrinking of its market value, causing the market to become even more volatile.
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<li aria-level="1">Sensitivity to News </li>
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Cryptocurrencies are highly sensitive to news. Geopolitical news, illegal activities, and government regulations contribute to the crypto market volatility. Let’s use an example to understand this better. 
When Tesla announced they’ll not accept cryptocurrencies as a payment mode, the value of Bitcoin took a sudden dive. But when Elon Musk, the CEO of Tesla, posted the picture of a dog mentioning ‘DOGE’ on his Twitter page, the value of Dogecoin rose by over 300% in just four hours!
You can <a href="https://www.delta.exchange/blog/hedging-crypto-portfolio-with-options-trading-strategies">hedge your crypto portfolio with options trading strategies</a> and mitigate the risks arising from this notoriously volatile market. 
Volatility Indicators for Crypto Markets 
You can use the following market volatility indicators to track crypto market movements: 
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<li aria-level="1">Bitcoin and Ethereum Historical Volatility Index </li>
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BitVol (Bitcoin Volatility) and EthVol (Ethereum Volatility) indices provide the measure of expected implied volatility for the next 30 days for these two cryptocurrencies. The information is derived from historical data on the tradeable options of these cryptocurrencies. Data from 2020 onwards are reflected in its fear gauge. You can use it to evaluate trends in crypto prices.
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<li aria-level="1">CVI (Crypto Volatility Index) Chart </li>
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CVI is a decentralised volatility index that crypto traders can customise for their use. Options traders can use this information to formulate strategies for protecting themselves against any kind of loss. The most important advantage is that it gets updated in real-time and is publicly available. 
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<li aria-level="1">Bollinger Bands </li>
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Bollinger Bands is a popular technical indicator in the crypto market due to its simplicity and effectiveness. It shows the crypto market volatility and sentiments. Crypto options traders can use to determine the entry and exit points for a trade. They also use Bollinger Bands to determine overbought and oversold conditions.
<h2>Final Word </h2>
To sum up, beginners should be aware that the crypto options market is highly volatile. However, there are ways by which you can benefit from crypto market volatility.
You must formulate proper financial goals and decide on risk measures only after proper market analysis. Don’t forget that the crypto market is highly susceptible to geopolitical news and other events. Check the volatility indicators before making a trading decision.

Crypto options trading is gradually emerging as a popular alternative investment strategy for traders who wish to diversify their portfolios and make profits in a declining market.

How Crypto Options Traders Can Benefit from Market Volatility?