Risk Reversal: An Options Strategy for Low-Risk Profiles

When trading an asset such as cryptocurrencies, accounting for volatility is a must due to the potentially huge swings in prices that can occur at a moment's notice. That's where proper risk management and position hedging are crucial. They minimize your exposure as a trader, and help you make more small calculated bets without blowing up your account. 

One such example of portfolio hedging is risk reversal options, an investment strategy that can be used for both long and short positions. Keen to find out how? We’ll uncover all you need to know about risk reversal strategies and the potential benefits you can reap from employing such a strategy.

Key Takeaways:

• Risk reversal strategy protects a long or short position against unexpected movements with the use of options contracts. 
• If a trader has an existing long position, a short risk reversal strategy can be executed.
• If a trader has an existing short position, a long risk reversal strategy can be executed.

What Is a Risk Reversal Strategy?