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From Crypto to US Stocks: Why I Went All-In on Out-of-the-Money Options?

很大很大的橙子 joined discussion · Sep 28 20:54

Learn to Lose Small Before You Aim for the Big Win.

Hey everyone, it's Da Cheng Zi. In my previous post, I shared my 12-year journey in the crypto world. If you haven't had the chance to read it yet, click here to check out my insights and strategies on digital currencies.

Bought My First BTC for 800 RMB: My Twelve-Year Journey in Cryptocurrency>>

This time, I'm diving into my experience with US stock options. I'll break down my trading logic and share my personal approach, hoping that it'll be useful for your own trading journey!

I first got into crypto in 2013, so I've seen the entire evolution of digital assets. It wasn’t until this year that I started paying serious attention to stocks. The main reason? The increasing correlation between crypto and stocks, along with Trump's proposal to move US stocks onto the blockchain. I see this as a historic turning point. As for options, I had early exposure to structured products and wanted to understand the mechanics behind them, so I began studying them in-depth. Over time, options became a key tool in my investment portfolio.

From Crypto to US Stocks: Why I Went All-In on Out-of-the-Money Options?

Even more exciting is that we're at the threshold of the AI era. In the future, AI agents will completely reshape the way we invest—everything from gathering information, executing strategies, to managing risk will be transformed. I want to stay ahead by mastering all the major secondary market investment methods and derivative tools—whether it's crypto, stocks, options, or ETFs. The real advantage in the future will be in combining different aspects of technology and finance to get ahead of everyone else.

In my first post on moomoo, I mentioned buying long-dated, out-of-the-money call options on $Robinhood (HOOD.US)$ and $Tesla (TSLA.US)$. Here's the logic behind my picks:

First, I calculated that a three-year, 20% out-of-the-money call option on US stocks is essentially the same as a 3x leveraged perpetual contract. The key difference is that leveraged perpetual contracts can easily get wiped out by market swings—even if you're right on direction, you could still get liquidated. But with options, you can lock in your maximum loss, ride out the volatility, and as long as your logic holds, you can stay in the game. This is crucial for someone like me, who looks at long-term trends.

In other words, the real leverage tool in US stocks isn't margin trading or perpetual contracts—it's options.

Now, the stock picks:

HOOD: It's the centerpiece of the "crypto-stock correlation." It's the go-to platform for younger users. If US regulations loosen up and crypto merges with traditional finance, Robinhood will be one of the biggest beneficiaries.

TSLA: It's not just a car company anymore. It's a powerhouse of AI, energy, and self-driving tech. It's naturally volatile and has an evolving story, making it perfect for LEAPS calls, which capture non-linear opportunities.

Finally, the essence of the trade:

This trade was essentially my favorite strategy: volatility replacement. I sold $Ethereum (ETH.CC)$ call options with a four-month expiration and used the premiums to buy three-year call options on HOOD and Tesla.

Think of it as using "house money." I wasn't using my own capital to make the purchase, which changes my entire mindset. When the position is "free," I'm able to hold it without stressing over every little dip.

I see HOOD and TSLA as long-term plays, and LEAPS calls offer a combination of leverage and patience. By adding in that "free money" volatility replacement, this combination lets me ride big trends while staying calm and collected.

Crypto vs. Options: The Similarities and Differences

As I've moved from crypto to options, I often reflect on what these two have in common and where they diverge.

Similarities:

– Both are highly volatile, high-risk, high-reward markets: Emotions and hype often influence prices faster than fundamentals.

– Both are essentially betting on the future: Crypto bets on technology, consensus, and network effects; options bet on volatility, direction, and time.

– Both can lead you into the "greed and fear" traps: It's not the tools themselves, but the trader's mindset and discipline that matter most.

Differences:

– Pricing Logic: Crypto's value comes from supply and demand, network effects, and the narrative surrounding it. Options, however, are priced using established mathematical models (like Black-Scholes), depending more on volatility and time decay.

– Market Structure: Crypto operates 24/7, resembling a completely free market. The options market, although flexible, still operates within the framework of traditional finance and regulations.

– Entry Barriers: Crypto is easy to enter—you just need a wallet. But options require a deep understanding of how strategies interact. If you don't understand Greeks, you're setting yourself up for some serious trouble.

I've always believed that crypto and options are two fields that, on the surface, seem vastly different but share a similar core philosophy: they both teach you how to use limited resources to bet on an uncertain future. Crypto represents the new world, while options are a well-established tool from the old world. Combining the two can unlock investment opportunities in the AI + finance era.

Dealing with Challenges and Adjusting My Strategy

Whether in crypto or options, every trader faces obstacles. I'm no different. So let me share the challenges I've faced and how I adjusted my mindset and strategies.

1. Challenges

– In crypto, the biggest challenge is extreme volatility and black swan events, where prices can change in a day what might take traditional markets a quarter to do.

– In options, the challenge lies in forecasting volatility, especially during big events. You might get the direction right but still lose money because volatility doesn't play out as expected.

– But both trading styles face one big shared challenge: emotional control. I've been there—chasing quick profits and going all-in, or getting scared after a few losses and freezing when I should’ve acted, missing opportunities.

2. I've since set some ground rules for myself

– Layer my positions. My core holdings are long-term and untouched. I hold $Bitcoin (BTC.CC)$ and $Ethereum (ETH.CC)$ no matter what the market does. This gives me confidence and keeps me focused on the long-term picture. I only use a small portion of my capital for short-term trades, so if I'm wrong, it's no big deal.

– If the market moves against me unexpectedly, I don't tough it out. I use Delta Dynamic Hedging (DDH) or cut my losses, ensuring risk stays under control.

– I also live by one principle: A gambler without a stop-loss is guaranteed to lose. That's why I set strict take-profit and stop-loss levels and follow them mechanically, keeping emotions out of the equation.

– I regularly review my trades by writing in a journal, breaking down what went wrong—whether it was timing, position size, or logic. I remind myself that the AI and crypto eras are just beginning, and short-term volatility is just noise. These strategies help me stay calm when the markets get wild.

To sum up, the key to surviving long-term is: don't touch your core holdings, stick to your stop-loss and take-profit rules, and keep your emotions in check.

3. Strategy Changes

– When facing setbacks, I tend to lower my leverage and extend my time horizon, focusing on the bigger picture.

– In crypto, I use more spot trading + options protection.

– In options, I favor combination strategies like spreads and collars to control drawdowns.

– Bottom line: It's fine to make mistakes, but you can't afford not to adjust. Once you pay for a market lesson, turn it into valuable experience.

My Favorite Options Strategies

Apart from buying simple calls, I also use a few common strategies in my options trading.

1. Sell-Side Strategies

When I sell options, I'm essentially profiting from volatility decay. If volatility stays within the range I expect, I simply collect the time value. But if volatility goes beyond what I forecast, I use Delta Dynamic Hedging (DDH), which is like a “reverse stop-loss” that helps me lock in losses and keep things under control.

The strategy I use most often is Sell Put. This is similar to "pretend-buying" the underlying asset. I sell put options at a price I'm willing to buy at, earning the premium while building a position at a lower cost. This is a move that Duan Yongping frequently uses. The risk, however, is that if the price drops more than expected, I need to have cash ready to buy the asset or risk being forced into a position.

I also use Covered Calls, especially with long-term positions like Bitcoin and Ethereum. This strategy lets me earn an extra layer of premium, turning volatility into cash flow. But there's a downside: if the market suddenly surges, I'm capped on the upside of my core positions. So, I typically use this strategy in a neutral to slightly bullish market.

2. Buy-Side Strategies

When I'm on the buy side of options, I break my strategies down into two categories:

– Zero-Day (0DTE), Out-of-the-Money Options: This is pure speculation. I don't use stop-losses, I just let them expire—either they're worth zero, or they make a huge profit.

– Long-Term Options (LEAPS): These are used for leveraging because options provide non-linear leverage. If I'm right, the profits can be huge. But if I'm wrong, I'll cut my losses based on market movements and won't hold onto them until they expire.

3. Straddle/Strangle strategies are ideal before major events like FOMC, regulatory announcements, or news like Trump's blockchain speeches. These strategies are all about betting on volatility, but the risk lies in time decay. If the market doesn't move as expected, you can lose money quickly, so I always keep my positions small and act fast.

4. By combining the buy and sell strategies mentioned above, I've developed my favorite play: Volatility Replacement.

For example, I sold call options on Ethereum with a $5,000 strike price, then used the premium I collected to buy calls on Robinhood and Tesla. The logic behind this is that Ethereum has high volatility and rich premiums, so I take those premiums first, then use them to place my bets on stocks I'm bullish on.

This isn't just hedging; it's cross-market volatility arbitrage. The benefit is that even if Ethereum doesn't experience big price movements, I can still use its volatility to make moves in a different market. As the correlation between crypto and stocks grows stronger, this strategy becomes even more meaningful—and it’s one of my favorite things to do.

Overall, I use a layered approach to my strategies:

– Sell Put + Covered Call for a more conservative, stable approach, suitable for overlaying on core positions;

– Straddle/Strangle to capture event-driven volatility;

– Volatility Replacement is my most fun and creative play.

My Risk Tolerance

Of course, no strategy is complete without risk management. Personally, I'm comfortable with the following:

– For a single long-term call option, I can accept a 50% drawdown.

– On a portfolio level, I keep my overall drawdown between 25%-30%, using position layering and hedging tools to manage risk and avoid any catastrophic losses.

Key Takeaways

The core difference between selling and buying options is that selling is about managing volatility, while buying is about non-linear, explosive gains. The essential idea is the same: for individual trades, I'm willing to accept larger drawdowns, but for my overall portfolio, I stick to a disciplined approach.

With the increasing correlation between crypto and stocks, I've realized that some options strategies are universal. The logic behind them works in both markets. In the crypto world, where volatility is high and black swan events are common, I use options to “buy insurance” or collect high premiums by selling. In the stock market, even though volatility is generally lower, events like earnings reports or policy changes can still provide excellent opportunities for price movements. The underlying logic remains the same—it's just the market environment that changes.

Classic strategies can be used across markets. For instance, Sell Put for building positions, Covered Call for generating cash flow, and Straddle/Strangle for volatility in event-driven situations. These strategies work just as well on BTC/ETH as they do on stocks like Tesla or Robinhood. The main difference lies in position sizing and timing: in crypto, you need to be mindful of extreme volatility, while in stocks, you should focus on the timing around event windows.

Volatility Replacement, my favorite strategy, also works across markets. For example, I might sell a high-volatility call on Ethereum, and use the premium to buy call options on Robinhood. This way, I'm using one market's volatility to capture opportunities in another. It's this kind of strategy that makes the growing crypto-stock correlation even more interesting to me.

In summary, my experience boils down to this: The tools and logic behind options are universal. The market is just the stage—what matters is how you combine them.

Final Advice for Beginners

To wrap it up, here's some advice for those just starting out:

1. Don't dive into the most complex strategies right away. Start with the basics.

– Buy Call/Buy Put: Understand the directionality and time decay, and get familiar with the difference between options and the underlying stock.

– Covered Call / Sell Put: If you already own BTC, ETH, or stocks, these are safer sell-side strategies for earning premiums.

– Avoid more complex strategies like Straddle/Strangle, and never sell naked options—the risk is far greater than you think.

2. When it comes to learning, I highly recommend you get a solid grasp of Greeks (Delta, Gamma, Theta, Vega). Even if you only remember the basics.

– Delta = Directional exposure

– Theta = Time decay

– Vega = Sensitivity to volatility

Once you understand these concepts, you'll have a much clearer picture of how options work in the market.

3. Control your position size; never go all in.

4. Focus on staying in the game, then worry about making profits.

5. Use options as a risk management tool, not as a gambling tool.

To sum it up in one sentence: Learn to lose small before you try to win big. That's the true path to mastering options.

I wish you all the best and hope you find the right strategies and tools that suit your investment style. Here's to long-term success on your investment journey!

Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more

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午餐肉罐头 : Thank you.

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The Unicorn : impressive! well done do u have an opinion on Sofi ?

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74354254 : Can the expert take me under their wing?

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74354254 : I feel like I've met a benefactor.

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OptiRhythm : I’ve come to understand that many of those who purchased Bitcoin over a decade ago have reaped significant profits, often unintentionally. It’s a pity no one told me about it at the time; otherwise, I could have invested a small amount and held onto it.

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OptiRhythm : Selfless sharing, thumbs up

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WaListreet : Good read

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105161579 : It was useless, I made a mistake in the proposal.

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xio wei :

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