How One Ether Options Trader Lost $3M in a Trade Gone Bad

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A trader just learned the hard way that it’s pretty easy to lose $3 million in the volatile world of the crypto options market.
The ether put options seller took a large bet against a sharp drop in the cryptocurrency and ended up booking a massive loss on Tuesday as the token powering Ethereum’s blockchain tanked to a three-month low of $1,700.
“The market moved just enough to force the trader to take a loss by buying back 5,000 contracts of the December expiry $2,560 put option sold earlier this quarter,” Gregoire Magadini, CEO of options analytics platform Genesis Volatility, told CoinDesk in a Telegram chat. “The trade looks to have yielded a loss of over $3 million.”A put option gives owners the right to sell the underlying asset (in this case, ether) at a set price on a certain date. Holders of the option make money when the price falls below that “strike” price and are implicitly short the asset. Conversely, sellers of the option benefit only when the asset trades above the strike and are implicitly long. The ether options trader likely sold the $2,560 puts during the bull run, expecting a continued rally to last at least until the year-end and thus a steady drop in the option’s price.Source