Micro Contracts are standardized financial derivative agreements with significantly smaller notional values compared to their traditional counterparts, designed to allow granular exposure to an underlying asset. In crypto, these enable smaller-scale participation in futures or options markets, making leveraged trading accessible to a broader range of investors or for more precise position sizing.
Mechanism
The operational logic of micro contracts is identical to larger contracts but with a reduced unit size, meaning each contract represents a fraction of the underlying asset. This reduction lowers the capital requirement for entry, decreases the margin needed, and consequently limits the potential profit or loss per contract, allowing for finer control over risk exposure.
Methodology
The strategic approach for micro contracts aims to democratize access to sophisticated financial instruments, enable more precise risk management, and facilitate systematic trading strategies with smaller capital allocations. This methodology benefits crypto investing, smart trading, and institutional options trading by allowing for highly granular position adjustments, backtesting strategies with reduced capital, and providing hedging capabilities for portfolios that might not justify full-sized contracts.
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