How to Short Sell Bitcoin Using Call Spreads
What is short-selling?
The basic rule of profit is buy low, sell high. When you short-sell, you’re still going to buy low and sell high, but you switch the order. You sell high first.
You lock in a higher price to sell, then wait for the price to drop, so you can buy it once the price is lower.
In some markets, short-selling can be complicated and involve margin. On Nadex, short-selling is as easy as buying and there’s no margin.
Call Spreads have a floor and ceiling
Nadex allows you to trade within a price range between a higher price (the ceiling) and a lower price (the floor).
Between the floor and ceiling you can buy and sell the price of an underlying market like the euro, stock futures, gold, or Bitcoin, just like you would on any stock, futures, or forex platform.
As the price of the underlying market moves up, the price of the call spread moves up. The market goes down, the call spread price goes down. You try to buy low during up trends. And short sell high, closer to the ceiling, when the market goes down.
What’s the difference on Nadex?
The range gives you risk/reward limits and protection. If the market goes above the ceiling, you reach your maximum possible profit and stay there.
If the market drops below the floor, you stop losing money. No matter how far the market drops, your loss is limited to the difference between your entry price and the floor price.
This design gives you a built-in profit target and risk protection.
How to short Bitcoin the Nadex way.
Let’s say you see a downtrend in a market, in this case Bitcoin. It has done a 50% pullback upwards from the last major move and you think it will resume the downtrend.
For this example, let’s say you placed a simple market order to sell 1 contract. In other words, you are selling the market short, in the hope of profiting if the price goes down from your entry level...
You'll see several ups and downs and different choices you could make along the way.
Nadex offers unique opportunities to trade Bitcoin (or any of 28 other markets) on the way up and on the way down.
And if you already own Bitcoin, now you have a way to hedge your investment.
Nadex lets you trade the price of Bitcoin in the direction and the way that you want.