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Technology Background

Strategic Tools for Sophisticated Investors on rwa.win

What are options

Options are derivative contracts.
They give the buyer the right (but not the obligation) to buy or sell an underlying asset.
This action must occur at a predefined price before a specific expiration date.
The seller of the option is obligated to fulfill the contract if the buyer exercises it.
Options are complex financial instruments offering strategic flexibility.
rwa.win helps users understand how options can play a role in diversified investment portfolios.
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What are options

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Call Option
Right to buy. Used when anticipating price increases
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Put Option
Right to sell. Used when anticipating price decreases or for hedging.
Underlying Asset

The real-world property or resource that a digital token represents, providing intrinsic value and backing for the tokenized investment, such as real estate, infrastructure, or commodities.

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Strike Price

The fixed price at which a token holder can buy or sell the underlying asset in the future, commonly used in structured investment products or options linked to tokenized assets.

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Expiration Date

The specific date on which a tokenized contract, option, or structured product reaches maturity, after which the rights associated with it—such as buying, selling, or claiming returns—can no longer be exercised.

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Premium

The additional cost paid by an investor for acquiring a tokenized option or structured product, reflecting the value of the rights or benefits it provides beyond the underlying asset.

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Speculation

Investing based on the expectation of future price movements, often involving higher risk in pursuit of potentially significant returns from tokenized assets or market trends.

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Hedging

Using investments or strategies to reduce potential losses by offsetting risks associated with tokenized assets, helping to protect your portfolio from market fluctuations.

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Income Generation

The process of earning regular returns from tokenized assets through methods such as rental income, dividends, or interest payments, providing a steady cash flow to investors.

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Risks of options trading

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Risks of options trading

1
Complexity

Options are advanced financial instruments that require a strong grasp of market mechanics, pricing models (like Black-Scholes), volatility, and the factors that affect an option’s value (the “Greeks”). Misunderstanding these can lead to poor investment decisions.

2
Loss of Premium

Buyers of options pay a premium upfront. If the market doesn’t move in the anticipated direction before expiration, the option may expire worthless, resulting in a total loss of the premium paid—unlike stocks, there’s no residual value.

3
Potentially Unlimited Losses (for uncovered sellers)

Writing (selling) options without holding the underlying asset or an offsetting position exposes sellers to significant risk. For example, an uncovered call seller faces unlimited losses if the asset's price rises sharply, since they may have to purchase the asset at a high market price to sell at the lower strike price.

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Time Decay (Theta)

Options lose value over time, especially as they near expiration. Even if the underlying asset remains stable, the option’s time value diminishes daily—this phenomenon is called time decay and disproportionately affects short-term options.