Nov
13
2022
Bitcoin (BTC) vs Waves (WAVES) Compared and Explained

Bitcoin vs Waves: The Differences and Similarities

By | Growing Wealth, invest, Investing | Comments Off on Bitcoin vs Waves: The Differences and Similarities

As the world’s oldest form of crypto, Bitcoin is considered a store of value and a form of payment. Waves, a newer crypto, is more of a groundbreaker in the DeFi space.

Bitcoin was developed as an alternative to traditional currencies and financial channels. Waves, on the other hand, was created to allow users to launch their own applications and digital tokens. If you’re weighing whether to invest in Bitcoin vs. Waves, consider the advantages and disadvantages of each.

What Is Waves (WAVES)?

Waves is an open-source blockchain network that allows users to create and launch custom decentralized applications (dApps) and cryptocurrency tokens.

Blockchain technology processes information using “nodes”: decentralized networks of computers that can drive faster, more secure transactions. Decentralization is a key feature of the crypto realm, which is sometimes referred to as decentralized finance, or DeFi.

Waves works in a similar way to Ethereum, in that the Waves network is typically used to create products that require a high level of security — often relating to finance, personal identification, proprietary data, etc.

Waves has its own decentralized exchange, called DEX, and a native token, WAVES. The token works as a medium of exchange for network users, much like ETH on the Ethereum network.

How Does Waves Work?

Practically speaking, the Waves network is designed so that users with little or no crypto expertise can create digital tokens. All you have to do is fire up the Waves app or web platform and use the network’s token-creation system.

Waves offers users a different approach than similar blockchain networks in that tokens created on the network do not use advanced smart contracts, but rather scripts in user accounts. If you want to get technical, Waves uses a variation of the proof-of-stake consensus mechanism (called “leased” proof of stake) to verify data on the blockchain.

What Is Bitcoin and How Does It Work?

Bitcoin is a virtual currency. Launched in 2009 using blockchain technology, it’s the oldest and largest crypto asset on the market. Bitcoin balances and transaction records are maintained on a public blockchain ledger.

All Bitcoin records, transactions, and ownership data are maintained and verified by a large network of computers around the world through a proof-of-work consensus mechanism. (This is different from the proof-of-stake mechanism that Waves uses.) Through that mechanism, “miners” upkeep the network and are rewarded with Bitcoin.

Bitcoin holders can send each other Bitcoins, assuming they each have a special digital wallet or crypto wallet designed for that purpose, and a private key, which is an address where digital assets are stored.

Because Bitcoin is so popular, some businesses accept Bitcoin in exchange for goods and services — which is not the case for many other cryptocurrencies. In that sense, Bitcoin can be used as a literal currency in some situations.

💡 Recommended: Bitcoin Price History: 2009-2022

Comparing Bitcoin vs Waves

By now you may realize that Bitcoin and Waves are intrinsically different. Here are some ways in which the two are similar, and how they differ:

Similarities

The biggest commonality between Bitcoin and Waves is that both have been integral to the growth of the crypto market. Bitcoin was the trailblazer, and its immense growth in value over the past few years attracted attention from all over the investment sphere. But Waves’ ability to give folks with little know-how the tools to launch their own tokens is also generating buzz.

Differences

Bitcoin and Waves differ in key ways. Foremost, Bitcoin is a digital currency, while Waves is a platform for launching tokens. They’re two completely different things.

The two have different goals and aims, too. As noted above, Bitcoin was developed as an alternative to traditional currencies and financial channels. Waves was created to allow users to launch their own applications and digital tokens — even if they don’t know much about crypto.

On a technical level, the two exist on different blockchain networks and use smart contracts in different ways. Because it was designed as a currency, Bitcoin didn’t originally have smart contract functionality. Now, a separate blockchain network called Stacks enables smart contracts for Bitcoin. The Stacks blockchain uses the STX token as a “gas” asset to pay for executing smart contracts.

Smart contracts on the Waves blockchain feature scripts written in Ride, a domain-specific language for developing dApps focusing on security and ease of development. Due to built-in limitations, running Ride scripts doesn’t require any “gas” fees.

Finally, it’s worth pointing out that there is a huge disparity in value between Bitcoin and Waves’ token, WAVES. While Bitcoin has traded at prices exceeding $65,000 in the past, WAVES can be purchased for much less — typically between $4 and $30.

Bitcoin vs. Waves

 Bitcoin

 Waves
Built on blockchain technology and smart contracts ✓ ✓
Integral to the growth of crypto ✓ ✓
Functions as a platform ✓
Functions as a virtual currency ✓
Proof-of-stake mechanism ✓
Proof-of-work mechanism ✓

The Takeaway

Bitcoin and Waves couldn’t be more different in functionality, underlying technology, and business goals. As the world’s oldest form of crypto, Bitcoin is considered a store of value and a form of payment. It was developed as an alternative to traditional currencies and financial channels.

Waves, on the other hand, was created to allow users to launch their own applications and digital tokens. Waves is more of a groundbreaker in the DeFi space, allowing entrepreneurs with minimal tech knowledge to create crypto products.

FAQ

Is Waves crypto legitimate and trustworthy?

Waves has been around since 2016, and its relative longevity in the crypto space is a good indicator of its legitimacy.

How safe is Waves crypto staking?

You can stake digital assets on Waves, which is one reason it attracts many users.

Who created and who owns Waves crypto?

Waves was founded by Sasha Ivanov in 2016, and the company is headquartered in Moscow. Since then, a parent company, Wave Labs, has been established in Miami, FL.

Photo credit: iStock/DjelicS

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.
First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

SOIN0221029

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Nov
13
2022

Guide to How to Invest in Blockchain

By | Growing Wealth, invest, Investing | Comments Off on Guide to How to Invest in Blockchain

Blockchain technology has grown way beyond its roots as the foundation of most cryptocurrencies into an expansive tech sector that investors may want to consider. For those wondering how to invest in blockchain, there are multiple opportunities, from trading crypto to investing in companies that are developing new uses for blockchain.

The transparent, digital ledger known as blockchain is associated primarily with different types of crypto, but it has a rapidly growing number of use cases across many sectors: health care, law, real estate, finance, international trade, and more.

For investors willing to do their due diligence, and understand the risks involved, there are opportunities in the blockchain space.

A Look At Blockchain Technology

In order to understand what blockchain tech is, it helps to know the basics of how a blockchain works. While blockchain was the innovation in 2009 that made Bitcoin — and the entire cryptosphere — possible, numerous applications for blockchain technology have emerged since then.

Think of blockchain technology as a sort of next-level, digital infrastructure. It’s a transparent, append-only digital ledger that can be used to track or record almost any type of asset, from goods and services to patents, smart contracts, decentralized apps (dApps), and more.

Blockchain technology relies on cryptography and a system of peer-to-peer (P2P) verification to secure transactions and, in the case of cryptocurrency, to mine coins and tokens. Because the security of blockchain is critical to how it functions, complex consensus algorithms are used on each network.

Although most people think crypto goes hand-in-hand with blockchain, in fact blockchain technology is increasingly common for a range of digital products and functions. Anything that requires an immutable ledger, contract agreement, or data transaction record can use blockchain — such as real estate transactions, legal agreements, voting records, supply-chain tracking, and much, much more.

What Does Investing in Blockchain Mean?

Can you invest in blockchain? While you cannot invest directly in a blockchain itself — a blockchain can’t be owned by investors — there are multiple ways to invest in blockchain technology, and a growing number of sectors that use it.

•   By investing in crypto, you can think beyond the coin to what the entire crypto project is trying to create using its particular blockchain capabilities. The blockchain that supports the Ethereum network has different capabilities than the one that supports Bitcoin, Dogecoin, Litecoin, and so on.

•   You can invest in blockchain stocks and other securities, like exchange-traded funds (more on that below), initial coin offerings (ICOs), and cryptocurrency trusts. While many of these investment products are new, and may come with risks, they may also present new opportunities.

Investing in blockchain technology is a way to participate in the evolution of a whole new part of the market, which includes DeFi (decentralized finance) companies, digital securities, crypto exchanges — as well as existing sectors like real estate and supply chain management that are increasingly embracing blockchain.

Investing in Blockchain vs. Investing in Cryptocurrencies

Because blockchain is a big part of how cryptocurrency works, buying crypto is one way to invest in blockchain. Investing in cryptocurrencies means buying individual tokens that can be used within the blockchain technology ecosystem. And because each coin or token is so different, reflecting the blockchain it’s based on, interested investors can explore different types of crypto as a way of investing in different blockchain capabilities.

For example, some blockchains are programmed to support the execution of smart contracts, the creation of non-fungible tokens (NFTs), the cross-border transfer of funds, and much more. By owning the crypto that’s part of that ecosystem, you’re essentially investing in that blockchain. But there are many other ways to invest in blockchain today.

5 Ways to Invest in Blockchain

Here are some of the other ways to invest in blockchain. Because this is an evolving space, it’s important to carefully weigh the potential risks, as well as the likely costs, of some of these investments:

1. Purchasing Crypto ETFs, Trusts, and Other Investments

While investing in crypto can give you access to blockchain as an investment, Wall Street has found a few ways to make crypto more accessible to institutional investors through the use of crypto exchange-traded funds (ETFs), crypto trusts, crypto index funds, and other securities.

Bear in mind that investing in funds that invest in crypto can be a risky proposition — and one that removes the investor another step from investing in actual blockchain technology.

And although these crypto investments may sound similar to traditional investments that can be bought and sold by main street investors, these funds are typically available only to institutional or accredited investors and they are traded on over-the-counter (OTC) markets. OTC markets are known to be less liquid and more risky.

There are some products available to retail investors, such as ETFs that track companies that have exposure to blockchain technology. These may be a more direct route to investing in blockchain.

2. Initial Coin Offerings (ICOs)

When a new cryptocurrency gets created, oftentimes the developers hold an initial coin offering, or ICO, which allows people to purchase the tokens early in order to support the project and get a good price before the project launches.

ICOs, similar to initial public offerings of stock (IPOs), can be accompanied by a fair amount of public discussion about the merits of the new coin, and the technology it’s built on. For investors interested in finding the next blockchain investment for their portfolios, an ICO could provide an interesting opportunity.

3. Purchasing Cryptocurrencies

While this point was addressed above, it’s important to underscore that there are thousands of different types of cryptocurrencies that investors can buy and sell, each one with its own dedicated blockchain.

Unlike traditional fiat currencies, which are used as a means of exchange and a store of value, crypto often serves multiple functions on its dedicated blockchain. This is another reason to invest in crypto as a way to invest in various blockchains.

4. Investing in Blockchain-Based Businesses

When it comes to investing in blockchain technology stocks, there are a lot of options. The blockchain ecosystem is complex, involving developers, exchanges, miners, data, security, and more. There are also companies that aren’t directly making blockchain technology, but are using it for their existing business to streamline systems and increase efficiency. These include large corporations such as Walmart, Starbucks, IBM, Meta, and Amazon.

Buying shares in blockchain companies can be a great long-term strategy, since this industry is just getting started. Here are some of the subcategories of blockchain that one could invest in:

Decentralized Finance

Decentralized Finance (DeFi) shifts the control of financial transactions away from centralized financial institutions, such as banks. The goal of DeFi is increased transparency and efficiency, lower fees, and putting people in charge of their own money. Examples of DeFi include crypto wallets, peer-to-peer lending, and cryptocurrency exchanges.

DeFi wouldn’t be possible without blockchain technology. By investing in different aspects of the DeFi space, investors are essentially investing in the relevant blockchains and blockchain technology that supports these financial innovations.

Financial Technology

Related to the above: Financial Technology (Fintech) is a type of technology that improves upon financial services.

Blockchain technology plays a big role in fintech, as it is being used to revolutionize all aspects of legacy finance, from banking to lending and transacting.

Metaverse

The metaverse is essentially where the digital world intersects the material world. It includes technologies such as virtual reality, augmented reality, and online interactive virtual worlds. Users engage in immersive and interactive experiences for education, work, entertainment, and socializing.

Not everything in the metaverse uses blockchain technology, but many companies, such as game developers and social media platforms, are using cryptocurrency tokens within their virtual worlds, or recording data and transactions from those worlds on the blockchain. In other words, investing in the metaverse is essentially investing in blockchain technology.

Exchanges

Another way to invest in blockchain by investing directly in cryptocurrencies is to invest in stocks of cryptocurrency exchange companies, such as Coinbase (COIN). Exchanges allow people to buy, sell, and exchange different cryptocurrencies. Coinbase is a popular cryptocurrency exchange that is publicly traded on the Nasdaq.

Blockchain and Health Care

Blockchain is revolutionizing the health care system, and this transition is only just beginning. Blockchain can help with secure and efficient sharing of sensitive patient data, allowing health information to be used both within organizations and across the broader medical system. It can also help with healthcare contracts and negotiations, including healthcare insurance.

5. NFTs

Non-fungible tokens (NFTs) are cryptographic digital assets. Their data is stored on the blockchain, ensuring that they can’t be replicated or forged.

Pretty much anything can be tokenized, from real estate to music to art. Currently, most of the NFT market is focused on collectibles like sports cards and digital art. But there are other highly priced NFTs on the market, such as a tokenized version of the first-ever tweet.

Individuals can purchase NFTs and resell them for a profit if their value increases.

The Takeaway

Blockchain technology has become a tech sector that many investors may want to consider. For those wondering how to invest in blockchain, there are multiple opportunities, from trading crypto itself (which gives investors exposure to that crypto’s underlying blockchain), to investing in companies that are developing new uses for blockchain in many areas: health care, law, real estate, finance, international trade, and more.

Buying shares in blockchain companies can be a great long-term strategy, since this industry is just getting started. While you can’t invest directly in a blockchain (blockchain is the digital infrastructure organizations use to run various operations), you can invest in companies that use blockchain for decentralized finance, to run crypto exchanges, to create smart contracts, NFTs, and more.

FAQ

Can you invest directly in a blockchain?

No. Blockchain is a technology that is used for many purposes. There is no way to invest directly in a blockchain, but there are many ways to invest in companies developing and using blockchain technology.

How can you make money from blockchain?

You can potentially make money from blockchain by investing in stocks or ETFs focused on blockchain companies, purchasing individual cryptocurrencies, or initial coin offerings (ICOs).

What are some applications of blockchain technology?

Blockchain technology can be used for anything that requires a digital, append-only, immutable ledger of transactions or data storage. This includes money transactions, real estate transactions, voting records, supply chain tracking, and more.

Photo credit: iStock/Poike

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.
First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

SOIN0422045

Read more
Nov
13
2022
Margin vs Options Trading: Similarities and Differences

Margin vs Options Trading: Similarities and Differences

By | Going to College, invest, Investing | Comments Off on Margin vs Options Trading: Similarities and Differences

Margin and options trading are two investment strategies that investors may utilize when investing in the financial markets. Investors who use margin and options trading rely on leverage to potentially accelerate their gains while also risking big losses if their trades do not work out.

While margin and options trading have several similarities, there are also subtle differences between the two investing strategies. Savvy investors will want to know how both margin and options work to know when to choose the best strategy for their unique situation.

Options Trading vs Margin Trading

Similarities

Here are some similarities between margin trading and options trading:

•   Both options trading and margin trading allow you to leverage your investment dollars.

•   Higher potential rewards but also higher risk.

•   Requires additional account approvals from your broker.

Differences

Here is a look at the differences between options trading and margin trading:

•   Margin trading involves a loan from your broker. You can get involved with options trading without borrowing.

•   Using margin directly increases your buying power, while options trading allows you to control shares of stock with less money.

Options Trading and How It Works

Options are financial derivatives that allow an investor to control a particular security, like a stock or exchange-traded fund (ETF), without needing all the money to buy or sell the asset directly. The purchaser of an options contract has the right to buy or sell a security at a fixed price within a specific period of time, paying a premium for that right.

There are two main types of options contracts: call options and put options. A call option gives the purchaser the right – but not always the obligation – to buy a security at a specific price, called a strike price. In contrast, the purchaser of a put option has the right – but again, not always the obligation – to sell a security at the strike price.

Buying and selling call and put options are some of the various ways investors can use leverage to accelerate their gains. And since options contracts fluctuate in value, traders can buy or sell the contracts before expiration for a profit or loss, just like they would trade a stock or bond. This process of buying and selling options contracts is known as options trading.

💡 Recommended: Options Trading 101: An Introduction to Stock Options

How Does Options Trading Work?

Suppose stock ABC is trading at $40 per share. If you buy the stock directly like a traditional investment and the stock price goes to $44, you will have made a 10% profit.

However, you could also buy a call option for stock ABC and potentially accelerate your gains.

Say that a call option with a strike price of $40 for stock ABC is selling for a $1 premium. When the stock price moves from $40 to $44, the call option premium might move to $2. You could then sell the call option, pocketing the difference between the price of the option when you sold it and what you paid for the option ($2 – $1). That would represent a 100% return on your investment, not including commissions and fees.

Calculating the pricing of options can be complicated, but this simple example shows one way investors can use options trading to leverage their investments.

There are many ways to trade options, depending on your outlook on a particular asset or the market as a whole. Investors can utilize bullish and bearish options trading strategies that target short- and long-term stock movements, allowing them to make money in up, down, and sideways markets.

Aside from speculating on the price movement of securities, investors can use options to hedge against losses or generate income by selling options for premium.

💡 Recommended: How to Trade Options: An In-Depth Guide for Beginners

Pros and Cons of Options Trading

Here are some of the pros and cons of options trading:

Pros of Options Trading

 Cons of Options Trading
Allows you to use leverage for potentially increased returns Options generally have less liquidity than stocks
You can use options trading to speculate on the price movement of stocks, hedge against risk, or generate income Depending on your options strategy, you may have unlimited risk
Options trading may require a smaller upfront financial commitment than investing in stocks directly You need to be approved by your broker to trade options

Margin Trading and How It Works

Margin trading is an investment strategy in which you buy stocks or other securities using money borrowed from your broker to increase your buying power. You can potentially enhance your returns by using margin loans to purchase assets. However, using margin to buy securities can also magnify your losses.

In contrast, when you buy a stock directly, you pay for it with money from your cash account. Then, when you sell your shares, your profit (or loss) is based on the stock’s current price. This traditional way of investing limits gains, at least compared to margin trading, but also curbs potential risk: you can only lose as much as you invest.

Like options trading, margin trading is another way to increase your leverage in a particular investment. If you want to start trading on margin, you’ll likely need to upgrade the type of account you have with your broker. There are some subtle differences between a cash and margin account, and you’ll want to ensure you have the proper account to trade on margin.

Increase your buying power with a margin loan from SoFi.

Borrow against your current investments at just 12%* and start margin trading.

*For full margin details, see terms.

How Does Margin Trading Work?

After your broker approves you for a margin account, you can buy more stocks than you have cash available.

Here’s one example of how margin trading works: suppose that you have $5,000 in your account, and you want to buy shares of stock ABC, which is trading at $50 per share. With a regular cash account, you would only be able to buy 100 shares, since $50 multiplied by 100 equals $5,000. If the stock’s price goes up to $55, you can close your position with a 10% profit.

But if you have a margin account, you can buy additional shares. Your broker will approve you for a certain amount of margin. If your broker has approved you for a $5,000 margin loan, you now have $10,000 in buying power; you can buy 200 shares of stock ABC at $50 per share. If the stock’s price goes up to $55 in this example, your profits will be higher. You can sell your 200 shares for $11,000. Then, after repaying your margin loan, you still have $6,000 in your account, representing a 20% profit.

Keep in mind that the increased leverage works in both directions. If you buy a stock on margin and the stock’s price goes down, you will have higher losses than you would if you just purchased with your cash account.

If you enter into a margin position and the value of your account drops, your broker may issue a margin call and force you to either sell some of your holdings or put in additional cash. Your broker will require both an initial margin amount and a maintenance margin amount.

Pros and Cons of Margin Trading

Here are some of the pros and cons of margin trading:

Pros of Margin Trading

 Cons of Margin Trading
Increased leverage and buying power on your investments Higher risk if your trades move against you
Buying on margin may enhance your investment choices Your broker may force you to add more cash and/or sell your investments if they issue a margin call
Margin loans are often more flexible than other types of loans Most brokers charge interest on the amount they loan you on margin

How to Decide Which Is Right for You

Both options and margin trading can be successful investment strategies under the right conditions.

You may consider margin trading if you want to enhance your buying power with additional capital. If you want a type of investment with more flexibility, options trading might be suitable for you.

In either case, make sure you manage your risk so that you aren’t put in a situation where you lose more money than you have available.

Investing with SoFi

Options and margin trading are just two of the many investing strategies you can use to grow your wealth. If you’re ready to try your hand at either, and are comfortable with the risk, SoFi offers margin trading as well as an options trading platform. The options trading platform boasts an intuitive and approachable design that you can use whether you’re trading options from the mobile app or web platform. And if you find that any questions come up along the way, there are educational resources about options available for you.

Pay low fees when you start options trading with SoFi.

FAQ

Is margin trading better than options trading?

Neither margin trading nor options trading is necessarily better than the other. Both options trading and margin trading can make sense in specific situations. Which of these two investment options is best for you depends on your specific financial situation and goals.

How much margin is required to buy options?

Margin is not required to buy or sell options contracts. However, you may use a margin loan for options trading if it’s appropriate for your investing strategy.

Are options trading and margin trading the same thing?

While both options and margin trading allows you to use leverage to potentially increase your returns, they are not the same. Options trading involves trading options contracts, while margin trading involves borrowing money from your broker to make investments with more cash than you have in your account.

Photo credit: iStock/Just_Super

*Borrow at 12%. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.
SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
SOIN0322017

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Nov
13
2022
Binary Options Trading vs Gambling: How to Tell Them Apart

Options Trading vs Gambling: How to Tell Them Apart

By | Growing Wealth, invest, Investing | Comments Off on Options Trading vs Gambling: How to Tell Them Apart

Gambling is typically defined as risking something of value on an uncertain event. While common forms of gambling include the lottery, blackjack, or sports betting, the line between gambling and investing can be blurrier than you might think. Like some forms of gambling, binary options and other forms of options involve risking money for a possible reward.

However, there are some important differences between options trading and gambling, and it’s important to know what they are. That can help you decide whether your options trading behavior is investing or gambling.

What Is Options Trading?

Options trading is the trading of contracts that give a purchaser the right — but not always the obligation — to buy or sell a security, like a stock or exchange-traded fund (ETF), at a fixed price within a specific period of time. Since options contracts fluctuate in value, many traders can buy or sell the contracts before expiration for a profit or loss, just like they would trade a stock or bond.

Options are financial derivatives, meaning an option contract’s value is derived from the value of an underlying asset.

There are two main types of options: call and put options. A call option gives the holder the right — but not always the obligation — to buy an underlying asset. A put option gives the holder the right — but not always the obligation — to sell an underlying asset. In general, if you think the underlying asset price will go up, you would buy a call option. But if you believe the underlying asset price will go down, you would buy a put option.

You can buy and sell both call and put options, so no matter how you think the stock might perform, you can find an option strategy that suits you.

There are many strategies for trading options, depending on your outlook on the underlying asset. Options can be a way to hedge risk or increase leverage for a given investment.

💡 Recommended: Options Trading 101: An Introduction to Stock Options

Weekly Options

Most options contracts expire monthly, on the 3rd Friday of each month. However, many underlying securities also have options that expire weekly. These options are referred to as weekly options. Weekly options often have lower liquidity and higher volatility, since there is less time to smooth out the ups and downs of stock movement.

Is Options Trading Gambling?

There are many risks in playing the market, so investors should be cautious with their investments and have a risk mitigation plan in place before making any type of stock or option trade. While trading options is not generally considered gambling in and of itself, there are some risks associated with trading options like there are with gambling.

Are Weekly Options Gambling?

Weekly options — along with day trading — are another form of investing in the stock market that shares some characteristics with gambling. If you find yourself rapidly making trades in weekly options without a system in place, trading from social pressure, or because of excitement, you may be gambling rather than investing.

Mitigating Risk When Trading Options

Risk management is one of the most important parts of a solid investment strategy. If you are trading options, it’s crucial to have a plan for handling risk. One way that you can protect your capital and manage risk when trading options is through the use of protective collars. Protective collars can reduce your risk from larger-than-expected moves but also can reduce your overall gains.

How to Tell if You Are Investing or Gambling

There are no hard-and-fast rules to determine the difference between investing and gambling, but here are a few questions you can ask yourself to help tell the difference.

Trading Due to Social Pressure

If you find yourself trading options due to social pressure, that can signify that your activities are closer to gambling than investing. It can be common — especially in a bull market — for people to talk about investing with friends and co-workers. If you find that you are trading just because all of your friends are doing it, but you’re not in a financial position to bear the risk of trading, that may be a sign that you should reconsider trading stocks or options.

Trading Without a System

A good indicator that you are investing rather than gambling is that you have a system for how and when you trade. An investment system can include things like how to identify stocks to buy, technical and fundamental indicators, or a risk mitigation plan for what to do when a trade moves against you. If you are trading based on hunches and chance, that may indicate that you’re gambling and not investing.

Trading Because It Can Be Exciting

There’s no denying that excitement comes with making money, but if that excitement is the primary reason you’re trading, that is more akin to gambling than actual investing. It can be hard to separate emotions from rational thinking when making stock and option trades, which is another reason to have a trading strategy in place.

Investing With SoFi

There are no hard-and-fast rules that determine whether any particular trading behavior is investing or gambling. Instead, you might think about the reasons why you are investing. If you are trading options for the excitement, to fit in with others, or without a system, that may be a sign that your activity is closer to gambling than actual investing.

But if you understand the strategy and are willing to take the risk, you might have good reason to try options trading. With SoFi’s intuitive and approachable design, investors have the ability to trade options from the web platform or mobile app. And because options trading isn’t always straightforward to understand, there’s a library of educational resources about options offered.

Pay low fees when you start options trading with SoFi.

FAQ

What are the reasons to consider trading options?

For experienced investors, there are a lot of reasons to trade options. One reason can be to hedge an existing investment. Another possible reason is to get additional leverage; you can make (or lose) more money with a smaller investment using options.

What are the reasons to not trade options?

Options trading does carry some risk for investors, which can be one reason not to trade options. Options are also typically more volatile than their underlying stock, and some options strategies run the risk of losing your entire investment or even putting you in a position where you owe more than you have available. If you are just starting your investment journey, it might be a better idea to get practice by making less risky investments to gain experience.

Can you lose money from options trading?

Like nearly all investments, options trading carries the risk of losing money. Some options trading strategies run the risk of losing 100% of your investment. If you buy a call option and the stock closes at expiration below your strike price, your option will expire worthless. If you sell call options, you can even be in a position of losing a potentially unlimited amount.

Photo credit: iStock/fizkes

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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Nov
11
2022
ICO Investing: How to Purchase Initial Coin Offerings

ICO Investing: How to Purchase Initial Coin Offerings

By | Growing Wealth, invest, Investing | Comments Off on ICO Investing: How to Purchase Initial Coin Offerings

Initial coin offerings, or ICOs, are like IPOs but in the crypto space. When new cryptocurrencies make their debut on the public markets, they go through the ICO process — which is more intricate and involved than many people may believe. Given that it can pay off big to “get in early” on investments, ICOs understandably capture the attention of many crypto traders and investors.

Read on to learn more about initial coin offerings, how to invest in ICOs, where to find ICO listings, and what you should take into consideration before betting on a new crypto.

What Is an Initial Coin Offering (ICO)?

As mentioned, ICOs are similar to IPOs (initial public offerings) which mark the first time that the public can purchase a stock on an exchange. The big difference is that ICOs concern the public sale of cryptocurrencies, while IPOs concern stocks.

And just as some investors take part in IPO investing, they can likewise participate in ICO investing. That basically means buying a stock, or a cryptocurrency, as soon as it hits the market, with the hope that it increases in value.

How an Initial Coin Offering (ICO) Works

Companies go public in an effort to raise money. They’re essentially selling pieces of their ownership for cash. The same logic applies to ICOs, which are crowdfunded efforts to fund a new cryptocurrency.

As such, ICO stands for “initial coin offering,” and allows crypto investors to get in on the ground floor of a cryptocurrency startup. These investors are among the first wave piling into new crypto, and as such, stand to potentially benefit the most if (and it’s a big “if”) the crypto in question appreciates in value.

As for how an ICO actually works? It’s different from an IPO, which has a very standard process involving multiple parties and regulators. Bringing a new crypto to the market is more of a do-it-yourself process. In short, the person or team behind a new crypto outlines their plans in a white paper, explaining what the crypto is and how it’ll work.

After that, the crypto creators focus on a marketing push to get people to invest and buy into the currency. Those who opt to participate and become investors will exchange money for the new project’s coin or token.

Cryptocurrency creators collect money from some investors by making the coin available pre-ICO for sale. During this period, they typically issue coins at a discounted value, often in order to get capital to continue building out the currency.

This is, of course, a basic overview — the process can get much more granular. But this should give you an idea of how ICOs work.

Types of ICOs

Initial coin offerings can use a variety of structures to achieve their end goal: Additional financing for a crypto project. Here are a few of the main types of ICOs:

Static Supply and Static Price

An ICO involving a static supply and static price has a specific funding goal. That means that each token being sold has a preset value, and that there is a fixed supply of tokens. The tokens are then sold at the predetermined price until the supply is exhausted.

Static Supply and Dynamic Price

An ICO utilizing a static supply and dynamic pricing model does not have a specific funding goal. There is a predetermined number of tokens, however, but the value or price of those tokens can change, and consequently, the total amount of funding raised at the end of the process.

Dynamic Supply and Static Price

An ICO with dynamic supply and static pricing is one in which tokens have a predetermined value or price, but the supply is not static. Again, this would mean that there is no set funding goal, and the total raised would depend on the number of tokens sold.

3 Types of ICOs
Static Supply & Price Static Supply/Dynamic Price Dynamic Supply/Static Price
Preset token value No preset token value Preset token value
Fixed token supply Fixed token supply Undetermined token supply
Predetermined funding goal Funding goal undetermined Funding goal undetermined

How to Value ICOs

IPO valuations typically reflect careful research into the underlying company’s books and performance. But the process of valuing ICOs is different, since there is no underlying company with financial records (or history) to comb through.

As such, hype and investor sentiment represents a big underpinning of ICO valuations. Crypto assets, in general, derive their value either from functioning as cryptocurrencies, or as security or utility tokens for specific networks and systems. That makes it difficult to determine a monetary value out of the gate.

Investors typically determine the value of an ICO value based on potential uses the coin may have in the future, which could lead to price appreciation. The more hyped investors get, the higher potential values can soar, but the reverse is true as well.

Negative investor sentiment can lead to negative first-day returns for an ICO, which can impact the performance of the currency for at least six months.

That makes ICOs a notoriously risky investment. Hype men and con artists can easily take advantage of investors with little knowledge of the crypto space, and government regulators have only recently started outlining potential regulations for the industry.

Factors to Consider Before Investing in ICOs

It bears repeating: ICOs are incredibly risky — they are the opposite of safe investments. Because of that, there are some key considerations to make before putting your money on the line.

First and foremost is that investors will have little, if any protection if an ICO goes awry. As the crypto space is still largely unregulated and investors aren’t afforded many of the same protections that those in the stock market may see, there’s a real chance you could lose your money.

Finally, know that you may not receive your tokens, even if you paid for them. There are no guarantees in crypto, at least not yet, so if you’re particularly risk-averse, then ICO investing may not be for you.

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.

*Probability of Member receiving $1,000 is a probability of 0.028%.

How to Buy ICO Tokens in Five Steps

Wondering how to buy ICO tokens? Follow these five steps:

Step 1: Do Your Research on the ICOs

As a crypto investor, you should always be doing some homework and research on a specific token before putting your money on the line. As mentioned, this can be tricky in crypto, since there’s limited historical data and information related to many projects out there, but you should do the best you can.

In crypto, your research usually begins with the project’s white paper; you’ll want to learn everything you can about the development team behind it, and whether it has attracted much interest from other investors. If the white paper does not have details about token’s code or security features that’s a potential red flag that may require more due diligence.

Step 2: Register for the ICO

Once you’ve found an upcoming ICO that appeals to you, sign up to take part in it. This may require some legwork, but you can track down a pre-ICO list and ICO listings on numerous crypto-focused websites.

Be aware, though, that each ICO typically has different registration procedures. So, if you’re interested, poke around to learn the appropriate procedure, and follow it as needed.

Step 3: Set Aside Funds for Payment

Next, you’ll need to prepare to actually invest when you’re ready to put some money up. This means having money set aside in order to facilitate the investment.

You’ll need to have either fiat currency, such as dollars, or some other crypto ready to make an exchange, as needed (typically, either Bitcoin or Ethereum, the two biggest cryptos). You’ll also need to have money and or crypto standing by in a digital wallet so that you can make the trade.

💡 Recommended: How to Send Bitcoin to Another Wallet

And finally, be sure that you’ve joined the appropriate or correct crypto exchange for the ICO. Some exchanges only allow investors to trade certain cryptos. You’ll want to be sure the ICO you’re targeting is listed on the exchange you’re working on.

It’s also a good idea to do a little research on any platform that you plan on joining. There are factors that make a good crypto exchange, and not all are created equal.

Step 4: Make the Exchange

This part is pretty simple: Execute the trade! The specifics here will depend on the individual ICO, exchange, and procedures.

Step 5: Receive and Store Your ICO Purchase

Ideally, after the execution of the trade, your new coins will go right into your crypto wallet (whichever of the many types you choose) for safekeeping. From there, ICO investors are largely at the mercy of the market to dictate what happens with your new investment.

It may be worth it to closely watch the ICO and other news around the new crypto, so that you can make wise decisions about when or if you should sell. One upside to ICOs compared with IPOs is that there’s no IPO lock-up period preventing sales.

How to Buy Tokens After an ICO

After a crypto token completes an ICO, it’s now available for purchase on the open market. So, if you want to buy tokens that recently made their market debut, all you need to do is buy them on an exchange or through a brokerage. The key, though, is making sure you’re using an exchange that trades the token you’re looking for.

Similar to how stocks trade on the open market following an IPO, tokens are on the secondary markets following an ICO. It’s just a matter of investors making sure they’re on the right exchange to trade them.

The Takeaway

ICOs involving bringing new crypto tokens to the market, just like an IPO brings new stocks to the market. The ICO process varies from project to project, but ICOs give investors a chance to get in early on a new or emerging crypto asset. But investors should keep in mind that ICOs are risky, and do their homework before putting their money into this type of investment.

FAQ

Who can participate in an ICO?

For most projects, anyone can participate in an ICO granted they’re registered, and have a crypto wallet and cryptocurrencies to trade with. Depending on the specific ICO, prospective investors may need to join a certain exchange to facilitate the transaction, too.

What’s the difference between an ICO and an IPO?

The main difference between an ICO and an IPO is the asset that’s being debuted. ICOs involve crypto tokens or cryptocurrencies, whereas IPOs involve stocks, or shares of companies going public.

Who can launch an ICO?

Anyone can launch an ICO, granted they know what they’re doing. Because the ICO and crypto markets are lightly regulated in the U.S., anyone with a crypto project can bring a new crypto to the market.

Is an ICO legal?

Yes, ICOs are legal. But there are some considerations to make before engaging in one. Regulators in the U.S. may consider an ICO a securities offering, and as such, could enforce securities law on those engaging in an ICO. As always, it’s best to consult with a professional about the details.

What is an ICO used for?

An ICO’s primary purpose is to generate funding for a crypto project. The project sells tokens which generates money, which can then be reinvested in the project.

Photo credit: iStock/ismagilov

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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