Jan
04
2022
What Is a Bull Put Credit Spread? Definition and Example

What Is a Bull Put Credit Spread? Definition and Example

By | Growing Wealth, invest, Investing | Comments Off on What Is a Bull Put Credit Spread? Definition and Example

The bull put credit spread, also referred to as bull put spread or put credit spread, is an options trading strategy. In a bull put credit spread, an investor buys one put option and sells another. Each set of options has the same underlying security and the same expiration date, but a different strike (exercise) price. The strategy has limited upside and downside potential.

Investors employing a bull put credit spread receive a net credit from the difference in option premiums. The strategy seeks to profit from a modest increase in price of the underlying asset before the expiration date. The trade will also benefit from time decay or a decline in implied volatility.

Recommended: 10 Important Options Trading Strategies

How a Bull Put Credit Spread Works

In a bull put credit spread, the investor uses put options, which give the investor the right – but not the obligation – to sell a security at a given price during a set period of time. For that reason, they’re typically used by investors who want to bet that a stock will go down.

To construct a bull put credit spread, a trader first sells a put option at a given strike price and expiration date, receiving the premium (a credit) for the sale. This option is known as the short leg.

At the same time, the trader buys a put option at a lower strike price, paying a premium. This option is called the long leg. The premium for the long leg put option will always be less than the short leg, since the lower strike put is further out-of-the money. Thus, the trader receives a net credit for setting up the trade.

The difference between the strike prices of the two sets of options is known as the “spread,” giving the strategy its name. The “credit” in the name comes from the fact that the trader receives a net premium upfront.

Recommended: What Is a Protective Put? Definition and Example

Profiting from a Bull Put Credit Spread

In a properly executed bull put credit spread strategy, as long as the value of the underlying security remains above a certain level, the strategy produces a profit as the difference in value between the two sets of options diminish. This reduction in the “spread” between the two put options reflects time decay, a dynamic by which the value of an options contract declines as that contract grows closer to its expiration date.

As the “bull” in the name indicates, the strategy’s users believe that the value of the underlying security will go up before the options used in the strategy expire. For bull put credit spread investors, the more the value of the underlying security goes up during the life of the strategy, the better their returns, although there’s a cap on the total profit an investor can receive.

If the underlying security drops under the long-put strike price, then the options trader can lose money on the strategy.

Recommended: How to Trade Options

Maximum Gain, Loss, and Break-Even of a Bull Put Credit Spread

Investors in a bull put credit spread strategy make money when the value of the underlying security of the options goes up, but the trade comes with limited loss and gain potential. The short put gives the investor a credit, but caps the potential upside of the trade. And the purpose of the long put position – which the investor purchases – protects against loss.

The maximum gain on a bull put credit spread will be obtained when the price of the underlying security is at or above the strike price of the short put. In this case, both put options are out-of-the-money, and expire worthless, so the trader keeps the full net premium received when the trade was initiated.

The maximum loss will be reached when the price of the underlying security falls below the strike price of the long put (lower strike). Both put options would be in-the-money, and the loss (at expiration) will be equal to the spread (the difference in the two strike prices) less the net premium received.

The breakeven is equal to the strike price of short put (higher strike) minus net premium received.

Example of a Bull Put Credit Spread

Here’s an example of how trading a bull put credit spread can work:

Bob, a qualified investor, thinks that the price of XYZ stock may increase modestly or hold at its current price of $50 over the next 30 days. He chooses to initiate a bull put credit spread.

Bob sells a put option with a strike price of $50 for a premium of $3, and buys a put option with a strike price of $45 for a premium of $1, both expiring in 30 days. He earns a net credit of $2, the difference in premiums. And because one options contract controls 100 shares of the underlying asset, the total credit received is $200.

Scenario 1: Maximum Profit

The best case scenario for Bob is that the price of XYZ is at or above $50 on expiration day. Both put options expire worthless, and the maximum profit is reached. His total gain is $200, equal to $3 – $1 = $2 x 100 shares, less any commissions. Once the price of XYZ is above $50, the higher strike price, the trade ceases to gain additional profit.

Scenario 2: Maximum Loss

The worst case scenario for Bob is that the price of XYZ is below $45 on expiration day. The maximum loss would be reached, which is equal to $300, plus any commissions. That’s because $500 ($50 – $45 x 100) minus the $200 net credit received is $300. Once the price of XYZ is below $45, the trade ceases to lose any more money.

Scenario 3: Breakeven

Suppose that on expiration day, XYZ trades at $48. The long put, with a strike of $45, is out-of-the-money, and expires worthless, but the short put is in-the-money by $2. The loss on this option is equal to $200 ($2 x 100 shares), which is offset by the $200 credit received. Bob breaks even, as the profit and loss net out to $0.

Related Strategies: Bear Put Debit Spread

The opposite of the bull put credit spread is the bear put debit spread, also known as a put debit spread or bear put spread. In a bear put spread, the investor buys a put option at one strike price and sells a put option at a lower strike price – essentially swapping the order of the bull put credit spread. While this sounds similar to the bull put spread, the construction of the bear put spread results in two key differences.

First, the bear put spread, as its name implies, represents a “bearish” bet on the underlying security. The trade will tend to profit if the price of the underlying declines.

Second, the bear put spread is a “debit” transaction – the trader will pay a net premium to enter it, since the premium for the long leg (the higher strike price option) will be more than the premium on the short leg (the lower strike price option).

Bull Put Credit Spread Pros and Cons

There are benefits and drawbacks to using bull put credit spreads when investing.

Pros

Here are the advantages to using a bull put credit spread:

•   The inevitable time decay of options improves the probability that the trade will be profitable.

•   Bull put credit spread traders can still make a profit if the underlying stock price drops by a relatively small amount.

•   The timing and strategy for exiting the position are built into the initial trades.

Cons

In addition to the benefits, there are also some disadvantages when considering a bull put strategy.

•   The profit potential in a put credit spread is limited, and may be lower than the return if the investor had simply purchased the security outright.

•   On average, the maximum loss in the strategy is larger than the maximum gain.

•   Options strategies are more complicated than some other forms of investing, making it difficult for beginner investors to engage.

The Takeaway

Bull put credit spreads are bullish options trading strategies, where the investor sells one put option and buys another with a lower strike price. That investor can make money when the value of the underlying security of the options goes up, but the trade comes with limited loss and gain potential.

If you’re ready to start trading options, check out SoFi’s options trading platform. It’s user-friendly, thanks to the platform’s intuitive design, and it offers a library of educational resources about options. Investors can continue to read up on options through the available library of educational resources.

Trade options with low fees through SoFi.

Photo credit: iStock/Ridofranz

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.
SOIN0921377

Read more
Dec
29
2021
woman on laptop

What Are Actively Managed ETFs?

By | Going to College, invest, Investing, Terminology | Comments Off on What Are Actively Managed ETFs?

Exchange-traded funds or ETFs generally fall into two categories: actively managed and passively managed. Actively managed ETFs, a growing category in the ETF market, are overseen by a portfolio manager.

The goal of an active manager is to outperform a certain market index, which they use as a benchmark for their portfolio. By contrast, passive ETFs simply mirror the performance of a particular market index; they don’t aim to outperform it.

There are two types of actively managed ETFs: transparent and non-transparent. Active non-transparent ETFs are a new option that was introduced in 2019; these funds are sometimes called ANTs.

Keep reading to learn more about the distinction among different ETFs, the pros and cons, and whether investing in actively managed ETFs makes sense for you.

How Actively Managed ETFs Work

Actively managed ETFs employ a portfolio manager and typically a team of analysts who do market research and make decisions to buy, hold, or sell the assets held within the fund. Most ETFs are designed to reflect a certain market sector or niche. They typically measure their success by using a known index as their benchmark.

For example, a technology ETF would be invested in tech companies and potentially use the Nasdaq composite index as a benchmark to measure its performance.

Despite the fact that passive (or index) ETFs strategies predominate in the industry — index ETFs represent roughly 98% of the ETF market — active strategies are gaining ground. That said, it has been historically quite difficult for active fund managers to beat their benchmarks.

Actively managed transparent and non-transparent ETFs are similar to traditional (i.e. index) ETFs. You can trade them on stock exchanges throughout the day, and investors can buy and sell in amounts as small as a single share. Broad availability and low investment minimums are an advantage that ANTs (and ETFs more generally) boast over many mutual funds.

Actively managed transparent ETFs

When exchange-traded funds first appeared some 20 years ago, only passive ETFs were allowed by the Securities and Exchange Commission (SEC). In 2008, though, the SEC introduced a streamlined approval process that allowed for a type of actively managed ETF called transparent ETFs. These funds were required to disclose their holdings on a daily basis, similar to passive ETFs. Investors would then know exactly which securities were being traded within the fund.

Many active fund managers, however, didn’t want to reveal their trading strategies on a daily basis — which is one reason why there have been fewer actively managed ETFs vs. index ETFs to date.

Non-transparent or semi-transparent ETFs

In 2019, another rule change from the SEC permitted an active ETF structure that would be partially instead of fully transparent. Under this new rule, an active ETF manager would be allowed to either reveal the constituents of their portfolio less often (e.g. quarterly, like actively managed mutual funds), or communicate their holdings more obliquely, by using various accounting methods like proxy securities or weightings.

The SEC ruling opened up a new channel for active managers, and since then the number of actively managed ETFs has grown. According to Barron’s, in just the past two years the number of actively managed ETFs has more than doubled. Nearly 60% of the ETFs launched in 2020 and 2021 were actively managed — more than all the actively managed ETFs established in the past decade.

From an investor’s perspective, the most noticeable difference between these two kinds of actively managed ETFs — transparent vs. non-transparent — would be the frequency with which these funds disclose their holdings. Both types of ETFs trade on exchanges at prices that change constantly during trading days; both rely on a team of managers to select and trade securities.

Index ETFs vs Active ETFs

So what is the difference between index ETFs and actively managed ETFs? It’s essentially the same difference that exists between index mutual funds and actively managed mutual funds.

How do index ETFs work?

Index ETFs, also called passive ETFs, track a specific market index. A market index is a compilation of securities that represent a certain sector of the market; indexes (or indices) are frequently used to gauge the health of certain industries, or as broader economic indicators. There are thousands of indexes that represent the equity markets alone, and Well-known indexes include the S&P 500®, an index of 500 of the biggest U.S. companies by market capitalization, as well as the Russell 2000, an index of small- to mid-cap companies, and many more.

Because index ETFs simply track a market sector via its index, there is no need for an active, hands-on manager. As a result the cost of these funds is typically lower than actively managed ETFs, and many active and passive mutual funds as well.

How do actively managed ETFs work?

Actively managed ETFs, often called active ETFs, rely on a portfolio manager and a team of analysts to invest in companies that also reflect a certain market sector. But these funds are not tied to the securities in any given index. The ETF manager invests in their own selection of securities, but often uses an index as a benchmark to gauge the success of their strategies.

Transparent actively managed ETFs must reveal their holdings each day.

Actively managed non-transparent ETFs, or ANTs, aren’t required to disclose their holdings on a daily basis. This protects asset managers’ strategies from potential “front-runners” — traders or portfolio managers that try to anticipate their trades. By and large, the cost of these funds is lower than transparent ETFs, and also lower than actively managed mutual funds.

Mutual Funds vs Actively Managed ETFs

All mutual funds and exchange-traded funds are examples of pooled investment strategies, where the fund bundles together a portfolio of securities to offer investors greater diversification than they could achieve on their own. In addition to the potential benefits of diversification, which may mitigate some risk factors, the pooled fund concept also creates economies of scale which helps fund managers keep transaction costs low.

That said, the structure or wrapper of mutual funds vs. passive and active ETFs, is quite different.

Fund structure

Although a mutual fund invests directly in securities, ETFs do not. With both active and passive ETFs, the fund creates and redeems shares on an in-kind basis. So when investors buy and sell ETF shares, the portfolio manager gives or receives a basket of securities from an authorized participant, or third party, which generates the ETF shares.

By comparison, mutual fund shares are fixed. You can’t create more of them based on demand. But you can with an ETF, thanks to the “in-kind” creation and redemption of shares. This means that ETF fund flows don’t create the same trading costs that might impact long-term investors in a mutual fund. And fund outflows don’t require the portfolio manager to sell appreciated positions, and thus minimize capital gains distributions to shareholders.

Pricing

The price of mutual fund shares is calculated once a day, at the end of the day, and is based on a fund’s net asset value (NAV). Investors who place a trade must wait until the NAV is calculated because most standard open-end mutual funds can only be bought and sold at their NAV.

ETFs, by contrast, are traded like stocks throughout the day. And because of the way ETF shares are created and redeemed, the NAV can vary, creating a wider or tighter bid-ask spread, depending on volume.

Fees

The expense ratio of mutual funds includes management fees, operational expenses, and 12b-1 fees. These 12b-1 fees are a type of marketing and distribution fee that don’t apply to ETFs, which trade on stock exchanges.

Thus the expense ratio for most ETFs, including actively managed ETFs, can be lower than mutual funds.

Pros and Cons of Actively Managed ETFs

As with any investment vehicle, these funds have their pros and cons.

Pros

Potentially for higher returns

One advantage of an actively managed ETF is the potential for gains that could exceed market returns. While very few investment management teams beat the market, those who do tend to produce outsize gains over a short period.

Greater flexibility and liquidity

Active ETFs could also provide greater flexibility amid market turbulence. When world events rattle financial markets, passive investors can’t do much other than go along for the ride.

A fund with active managers might be able to adjust to changing market conditions, however. Portfolio managers could be able to rebalance investments according to current trends, reducing losses, or even profiting from panics and selloffs.

Like passive ETFs, active funds also trade throughout the day (as opposed to some mutual funds who only have their price adjusted once daily), allowing investors the opportunity to do things like short shares of the fund or buy them on margin.

Cons

Higher expense ratios

One disadvantage of investing in an actively managed ETF is the potentially higher expense ratio. Active funds, whether ETFs or mutual funds, tend to have higher expense ratios. The costs associated with paying a professional or entire team of professionals combined with the fees that result from additional buying/selling of investments typically adds up to higher costs over time.

Each purchase or sale might come with a brokerage fee, especially if the securities are foreign-based. These costs exceed those of passive funds, resulting in higher expense ratios.

Performance factors

While active ETFs aim to provide higher returns, most of them don’t. It’s a widely known fact in the investment world that the majority of actively managed funds (as well as most individual investors) do not outperform the market over the long term.

So, while an active ETF may have the potential for greater returns, the risk of lower returns, or even losses, can also be greater. The chances of choosing an active fund that fails to outperform its benchmark are greater than the odds of choosing one that succeeds.

Bid-ask spread

The bid-ask spread of ETFs can vary, and while it’s more beneficial to invest in an ETF with a tighter bid-ask spread, that depends on market factors and the liquidity and trading volume of the fund. To minimize costs, it’s wise for investors to be aware of the bid-ask spread.

Investing in Actively Managed ETFs

Once an investor opens an account at their chosen brokerage, they can begin buying shares or fractional shares of actively managed ETFs.

Historically, brokerages have required investors to buy a minimum of one share of any security, so the minimum investment will most often be the current price of one share of the ETF plus any commissions and fees (many brokerages eliminated fees for buying or selling shares of domestic stocks and ETFs in 2019).

Some brokerages like SoFi Invest® now offer fractional shares, which allow for investors to purchase quantities of stock smaller than one share. This option may appeal to those looking to get started investing with a small amount of money.

It’s important to note that many ETFs pay dividends, which are payouts from the stocks held in the fund. Investors can choose to have their dividends deposited directly into their accounts as cash or automatically reinvested through a dividend reinvestment program (DRIP).

Investors with a long-term plan in mind might do well to take advantage of a DRIP, as it allows for gains to grow exponentially. For those only looking for income, DRIP might defeat the purpose of holding securities that yield dividends, however.

The Takeaway

Like mutual funds, exchange-traded funds or ETFs are considered pooled investments and generally fall into two categories: actively managed and passively managed. Actively managed ETFs, a growing category in the ETF market, are overseen by a portfolio manager. By contrast, passive ETFs simply mirror the performance of a particular market index; they don’t aim to outperform it.

Although actively managed ETFs make up only about 2% of the ETF universe, owing to regulatory changes in recent years this category has been growing. In fact there are now two types of actively managed ETFs: transparent and non-transparent. These funds offer investors the potential upside of active management, with the lower cost, tax-efficiency, and accessibility associated with ETFs. If you’re curious about actively managed ETFs, you can explore these products by opening an account with SoFi Invest®.

Learn more about investing with SoFi.

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

SOIN20170

Read more
Dec
23
2021
business man on phone

What is Ripple XRP? Everything to Know for 2022

By | Growing Wealth, invest, Investing, Terminology | Comments Off on What is Ripple XRP? Everything to Know for 2022

Cryptocurrency is a fast-moving space with new technologies and names arising on a daily basis. One of the largest and more polarizing subjects in the space is Ripple XRP, a private-company-founded platform and cryptocurrency launched in 2012. It has gained notoriety for its unique founding, structure, and operations.

Ardent supporters back its real-world adoption and growth potential. Dissenters contend that because of many of these same factors, it’s philosophically misaligned with cryptocurrency ideals and fundamentals.

Despite these contentions, Ripple XRP has grown to become a household name in cryptocurrency. Here’s everything you need to know about this cryptocurrency, and how to invest in it.

What Is Ripple?

Ripple is both a currency-exchange system designed to allow fast and low-cost transactions, and a cryptocurrency in its own right. Ripple’s primary goal is to connect financial institutions, payment providers, and digital asset exchanges to provide faster and cheaper global payments.

Created in 2012 by Jed McCaleb and Chris Larsen, Ripple is perhaps better known for its open-source, peer-to-peer decentralized platform, RippleNet, which enables money to be transferred globally in any fiat or cryptocurrency denomination between financial institutions.

Ripple makes some improvements on common shortfalls associated with traditional banks. Transactions on the Ripple Network are settled in seconds even under the regular stress of millions of transactions. Compare this to banks’ wire transfers which typically can take days to weeks to complete and can cost anywhere from $15 to $30 or more if sending or receiving internationally. Fees on Ripple vary based on the transaction size but overall are minimal, with the minimum cost for a standard transaction at 0.00001 XRP.

Whereas top cryptocurrencies like Bitcoin, Ethereum, and Litecoin are designed to be used primarily by individuals, Ripple’s system is designed to be adopted by banks, funds, and institutions.

What Is XRP?

XRP is the currency issued and managed by Ripple (though users can also create their own currency on the platform). Ripple began selling XRP in 2012 to fund company operations, allowing its users to buy cryptocurrency, though it has taken a backseat to the company’s primary objective of developing RippleNet.

Throughout Ripple’s lifespan, leadership has reframed how XRP fits into the company’s business model, originally proclaiming it as the fuel on which its borderless payments technology runs, and later as a more efficient medium of exchange than Bitcoin.

XRP tokens represent the transfer of value across the Ripple network and can be traded on the open cryptocurrency market by anyone. Unlike Bitcoin’s popular store-of-value narrative use-case, XRP is primarily used for payments and borderless currency exchange. While Ripple’s centralized infrastructure concerns some in the cryptocurrency space, its fast transaction speeds, low transaction costs, and low energy usage provide superior performance as a medium of exchange compared to many blockchain-based cryptocurrencies.

(Need a crash course on crypto before you can read any further? Check out our guide to cryptocurrency.)

What is the XRP Price?

At the time of reporting, the XRP price is $0.474494. It’s all-time high was $3.8419 in January 2018. It went as low as $.0041 in November 2015.

How Does Ripple Work?

There are two main technologies to be aware of when it comes to Ripple and XRP. Specifically, the XRP ledger (XRPL) and the Ripple Protocol Consensus Algorithm (RPCA). Here’s how they work.

XRP Ledger (XRPL)

RippleNet is built on top of its own blockchain-like distributed ledger database, XRP Ledger (XRPL), which stores accounting information of network participants and matches exchanges among multiple currency pairs. The transaction ledger is maintained by a committee of validators who act like miners and full-node operators to reach consensus in three to five seconds—versus Bitcoin’s 10 minutes. Because there are no miners competing to confirm transactions for block rewards, validators verify transactions for no monetary reward.

Anyone can become an XRP validator, but in order to gain trust and be used by others on the network, validators must make Ripple’s unique node list (UNL), deeming them a trusted Ripple validator. These centralized validators are critical to prevent double-spending and censorship of transactions. There are only 35 active XRP validators; six are run by Ripple.

Ripple Protocol Consensus Algorithm (RPCA)

XRP’s design is predicated on speed and cost, as opposed to decentralization. Unlike different types of cryptocurrency like Bitcoin and Ethereum, which are built on the blockchain and validated by miners through the Proof of Work consensus mechanism, Ripple confirms transactions through its own consensus mechanism, the Ripple Protocol Consensus Algorithm (RPCA).

By avoiding Proof of Work’s energy-intensive mining, Ripple transactions require less energy than Bitcoin or Ethereum, are confirmed faster, and cost less. However, this speed is ultimately achieved because of XRP’s centralized infrastructure, which some argue makes the network less secure, censorship-resistant, and permissionless than open-source blockchain networks.

Ripple Cryptocurrency Token Supply

Unlike many other cryptocurrencies, XRP is not mined. The token’s entire supply was created when the network first launched in 2012 and Ripple executives intermittently tap into an escrow to release segments of the supply to sell on the open market.

In other words, unlike Bitcoin’s decentralized economy, XRP’s supply and issuance is centralized and governed by a few authorities. Because the total supply already exists, no more will be created into existence, thus making XRP fixed in quantity and not inflationary.

As of January 2021, only 45 billion XRP tokens are in circulation, out of the maximum total 100 billion. Due to the vast circulating supply, XRP has had one of the largest market caps of any cryptocurrency, even briefly eclipsing that of Ethereum’s second-largest cap late in the 2017-2018 bull market.

Ripple Crypto and Regulatory Trouble

In late 2020, Ripple became the target of an SEC investigation . The regulatory body determined that Ripple Labs Inc. and two of its executives, Co-Founder Chris Larsen and CEO Bradley Garlinghouse, had raised over $1.3 billion through an “unregistered, ongoing digital asset securities offering” to finance the company’s operations. Consistent with recent cryptocurrency rules set by the SEC, Ripple’s leaders were charged with unlawful issuance of securities in the form of sales of its XRP token, raising questions about compliance with cryptocurrency taxes.

The XRP price crashed amid the fallout, from over $0.60 to under $0.30, as prominent crypto exchanges began delisting the token and Ripple executives, including Founder Jed McCaleb, sold off personal XRP holdings worth millions.

Is Ripple a Good Investment?

Though XRP has been impacted by Ripple’s legal blow, XRP is an independent token that can and does function somewhat outside of Ripple’s business model. The crash in price and soured fundamental outlook may not paint a bright picture of XRP as an investment to some. Whether XRP recovers and continues to evolve with the rest of the crypto herd remains to be seen, but as investors look for value in undervalued assets, it doesn’t hurt to do further research and form an educated conclusion.

Pros and Cons of Ripple XRP

Because Ripple is different in some ways from other cryptocurrencies, it makes sense to review its perceived pros and cons before making any investing decisions.

Pros of Ripple XRP

•  Fast speeds
•  Low fees
•  Interest/tentative adoption by financial institutions

Cons of Ripple XRP

•  Centralized infrastructure, governance, issuance
•  Corruptible validators
•  Unsupported by many exchanges

How to Invest in XRP

To start investing in Ripple, you first need to join a crypto exchange. Signing up for an account could include different verification processes, depending on the exchange. Once you’re signed up, you’re ready to trade or buy Ripple XRP. You can trade any current crypto you own, or you can buy a major cryptocurrency like Bitcoin or Ethereum and then use that to buy Ripple XRP.

The Takeaway

Ripple XRP is a global digital payments system that sacrifices decentralization for performance. The network and technology is owned and at least partly run by Ripple, the private company, which controls the underlying infrastructure, supply, and some of the limited network validators. While Ripple strays from the conventional decentralization model adopted by leading cryptos Bitcoin and Ethereum, it conforms to some degree through its own specially — designed infrastructure.

Although Ripple’s primary goal is providing a borderless payments and currency exchange gateway for financial institutions, its native cryptocurrency XRP has taken on a life of its own and is actively traded and analyzed by investors. With high-ranking metrics such as fast and inexpensive transactions, some investors argue XRP is a strong competitor to large cryptocurrency blockchains such as Bitcoin and Ethereum. Conversely, Ripple XRP’s centralization has been a major philosophical and security concern for others — including US regulatory bodies.

Cryptocurrency is an exciting new technology that’s disrupting money as we know it. With SoFi Invest®, members can trade some of the most popular cryptocurrencies, like Bitcoin, Ethereum, Cardano, Dogecoin, and Litecoin.

Find out how to invest in cryptocurrencies with SoFi Invest.

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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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.

SOIN21004

Read more
Dec
22
2021
Guide to Options Spreads: Definition & Types

Guide to Options Spreads: Definition & Types

By | Growing Wealth, invest, Investing | Comments Off on Guide to Options Spreads: Definition & Types

Options spreads are multi-legged trading strategies used to limit risk while also capturing the potential for profits. Traders using an option spread simultaneously buy multiple options with the same underlying asset with different strike prices, different expiration dates, or both.

Understanding options spreads can help you decide whether these strategies will work for your portfolio, and which one to use in a given situation.

Credit and Debit Spreads

The difference between credit spread options and debit spreads is that an options trader sells one (credit), and buys the other (debit). When a trader sells an option, they receive a premium (a credit) to their account. Conversely, when they buy an option, they pay a premium to open the position, resulting in a debit to their account.

Recommended: What Investors Should Know About Spread

3 Common Option Spread Strategies

In options spread strategies, the trader buys and sells multiple options pegged to the same underlying asset or security. The type of options that the trader buys and sells are all of the same type (i.e., they’re all call options or put options), and they either have different strike prices or expiration dates.

Recommended: Popular Options Trading Terminology to Know

There are several different types of option spreads. Here’s a look at a few common ones:

1. Vertical Spread Options

A vertical spread is an options strategy in which the options have the same expiration date but different strike prices. There are four types of vertical spread options that investors use depending on whether they are bullish or bearish and whether the spread is a debit or credit.

Bull Call Spreads

A bull call spread strategy involves buying a call option, and then also selling another call at a higher strike price. The call spread options have the same underlying asset and expiration date.

Investors using this bull spread options strategy anticipate an increase in the value of the underlying asset. With this strategy, a trader caps their potential losses to the net premium they paid for the options (essentially hedging their risk). Their maximum gain is capped at the differences in strike prices, minus the net premium paid.

For example, a trader buys a call option on Stock X at a strike price of $10, for a premium of $2. They also sell a call option with an identical expiration date at a strike price of $12, receiving a premium of $1. This is referred to as a “debit” spread, as the trader pays a net premium (of $1 in this case) to buy into their position.

Bear Call Spreads

The opposite of a bull call spread, a bear call spread benefits when the underlying asset’s value decreases. If we stick with Stock X from our previous example, a trader using a bear call spread would anticipate that Stock X’s value is going to decrease.

As such, the trader sets up the spread by selling a call option, and buying another call option at a higher strike price—the inverse of the bull call spread method. This is a “credit” spread,, so the trader can not gain more than the net premium the trader received for the position. Their potential loss is capped at the differences in strike prices.

Example: A trader sells a call option on Stock X at a strike price of $10, and buys another call at a strike price of $12.

Bull Put Spreads

A bull put spread is similar to a bull call spread, but it involves puts rather than calls. Using a bull put spread, a trader anticipates an increase in the underlying asset’s value. In our example, the trader would sell a put option at a strike price of $10, and simultaneously buy another at a lower strike price, say, $8.

The trader can not lose more than the difference between the strike prices or gain more than the premium received.

Bear Put Spreads

A bear put spread is the inverse of a bull put spread. In our example, the trader would buy one put option at a $10 strike price, and simultaneously sell another put at a lower strike price, like $8.

The trader can not lose more than the net premium the trader paid to take the position (again, because this is a “debit” spread) or gain more than the difference in strike prices.

2. Horizontal Spreads

Horizontal spreads (also called “calendar spread options”) involve options with the same underlying asset, the same strike prices, but different expiration dates. The main goal of this strategy is to generate income from the time decay effects, or volatility of the two options.

There are also two main types of horizontal spreads.

Call Horizontal Spreads

A call horizontal spread is a strategy which a trader would employ if they believe that the underlying asset’s price would hold steady. In this case, the trader would buy a call with an expiration date on January 15th, for example, and sell another call with a different expiration date, like January 30th.

The trader can also reverse these positions, by selling a call option that expires on January 15th, and selling another that expires on January 30th. The two positions with differing expiration dates act as buffers, reigning in potential losses (the premium paid) and gains.

Put Horizontal Spreads

Put horizontal spreads similar to call horizontal spreads, except that traders utilize puts instead of calls.

3. Diagonal Spreads

Finally, we have diagonal spreads, which incorporate elements from both vertical and horizontal spread strategies. That is, diagonal spreads involve the same option types and underlying asset (the same as before), but with differing strike prices and differing expiration dates.

Diagonal spreads—with different strike prices and expiration dates—allow for numerous combinations of options, making them a fairly advanced strategy. They can be bearish, and bullish for example, while also using calls or puts, with different time horizons (long or short).

Other Options Spreads

While we’ve covered the main types of options spread strategies, there are a few more you may run into.

Butterfly Spread Options

A butterfly spread incorporates multiple strike prices, and can utilize either calls or puts. It also combines a bull and bear spread across four different options.

An example would be a trader buying a call at a certain strike price, selling two more calls at a higher strike price, and then buying another call at yet an even higher strike price—of equal “distance,” or value, from the two central calls. This results in a cap on losses and gains, with the trader realizing gains depending on volatility levels of the underlying asset.

Box Spread Options

A box spread option strategy involves a bear put and a bull call with identical strike prices and expiration dates. Under very specific circumstances, traders can use the strategy to create profitable arbitrage opportunities.

The Takeaway


There are several different options spreads strategies that traders use to limit their losses and achieve potential gains based on their projections about the price of a specific asset. Options strategies can get complicated, but you don’t need to invest in derivatives in order to build a portfolio.

Whether you’d rather start slow or dive into derivatives, a user-friendly options trading platform like SoFi can help in your investing journey. SoFi’s platform offers an intuitive design and access to educational resources about options. You’ll have the ability to trade from either the mobile app or web platform.

Trade options with low fees through SoFi.

Photo credit: iStock/damircudic

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.
SOIN0821356

Read more
Dec
21
2021
laptop-coffee mobile

What to Know About Investing in Cryptocurrency

By | Growing Wealth, invest, Investing | No Comments

Since the launch of Bitcoin in 2009, thousands of different cryptocurrencies have entered the market, providing investors with an intriguing — and sometimes confusing — array of choices.

While investing in crypto may offer growth potential, cryptocurrencies as a whole have proven to be a volatile asset class, posting double-digit percentage gains and losses — sometimes within a single day. While such wild price swings have generated lucrative returns for some, others have suffered painful losses.

It’s important for investors to understand the fundamentals and risks of the cryptocurrency market before they start investing. Here’s a closer look at some basics.

Cryptocurrencies 101

Some consider cryptocurrencies to be a form of currency, while others see them as a store of value similar to gold. While the Securities and Exchange Commission (SEC) has yet to decide whether cryptocurrencies can be considered securities or commodities, the reality is that these new instruments have revolutionized the way we think of finance and financial markets.

Not that anyone could have predicted that in 2008, when a person or group using the pseudonym Satoshi Nakamoto published a paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Despite the mystery surrounding Nakamoto’s identity, bitcoin successfully launched in January of 2009.

The first altcoins — a term that refers to “alternatives to bitcoin” — were released in 2011, including Litecoin.

News reports tied use of bitcoin and other cryptocurrencies to illegal activity on the dark web. Some major scams and company failures, including the theft of hundreds of thousands of bitcoin on the crypto exchange Mt. Gox, contributed to volatility in the market’s early years.

However, by 2017, mainstream interest in bitcoin and other cryptocurrencies skyrocketed, sending its price close to $20,000. Despite ongoing price fluctuations, by 2021 bitcoin was not only the oldest crypto on the market but still the largest by market cap.

In November 2021, bitcoin would reach an all time high of nearly $69,000 and a total market cap of nearly $1.1 trillion, while the entire crypto market surpassed some $2 trillion in market value.

However, worries of a regulatory crackdown caused many crypto prices to fall in December 2021, as SEC Chair Gary Gensler indicated that many crypto might qualify as securities and thus fall under SEC regulations.

Blockchain 101

Not every cryptocurrency is built using blockchain technology, but some of the largest ones are. A blockchain is an unchangeable record of transactions. These transactions don’t have to be monetary in nature. Blockchains can be used to create contracts, to track the movement of products, to record votes, to prove that property transfers took place, and much more.

Cryptocurrencies and blockchains work hand in hand. For example, here’s how Bitcoin mining works: new coins are created through the process of maintaining the accuracy of its blockchain. Miners use computing power to solve complex cryptographic equations. As these equations are solved, they prove that all of the transactional information on the bitcoin blockchain is accurate.

As a reward for maintaining the blockchain, Bitcoins are created and given to the miners. The bitcoin blockchain is public and decentralized. This means that anyone can view any transaction between two bitcoin addresses. However, you don’t know who owns those addresses.

The decentralization of the blockchain means that there isn’t a single individual, company, or government in charge of Bitcoin and the blockchain. Changes to the blockchain code can be proposed and adopted by the miners. However, 51% or more miners must opt into a change in order for it to be implemented, otherwise Bitcoin forks into two markets.

Cryptocurrency Risks

Every investment comes with risks, and cryptocurrencies are no exception. Here are some the biggest ones investors should be aware of:

1.    Price Volatility: As mentioned, the price of Bitcoin halved within the span of a couple weeks in 2021. While the stock market is known for being a volatile asset class, the turbulence in share prices is nowhere near that of cryptocurrency prices. The market is still highly speculative, making it prone to big price swings and increasing the risk of investors locking in losses.

Recommended: Why is Bitcoin So Volatile?

2.    Theft: One of the choices investors have to make after buying cryptocurrencies is whether to store the coins and tokens in a hot wallet or cold wallet. Hot wallets are digital storage tools. The risk to them is that they’re more vulnerable to hacks and theft. Take for instance the Mt. Gox incident that occurred in 2011. While the cryptocurrency market has come a long way in terms of security since then, theft and hacks are still a risk.

3.    Fraud and Scams: The buzzy nature of the cryptocurrency industry unfortunately means that scammers are also drawn to the market. In 2021, the Federal Trade Commission (FTC) reported that between October 2020 and May 2021, more than 7,000 people reported losses of more than $80 million from bogus investment opportunities.

4.    Forgotten Keys: While the cold wallet storage solution can prevent hacks, some users of this method have fallen into the unfortunate situation of not remembering their wallet password – or “keys” in crypto lingo. That means there could be fortunes that individuals are not able to cash in on. Of the existing 18.5 million Bitcoin in circulation in January 2021, about 20% was estimated to be “lost” or trapped in a wallet.

5.    Regulatory Oversight: Chinese regulators stoked volatility in the cryptocurrency market in 2021, after clamping down on crypto mining operations and ordering payment firms to not do business with companies in the industry. U.K. regulators have also banned a leading crypto exchange. More crypto rules and regulation, including from countries like the U.S., are also expected, which could cause repercussions for usage and prices.

Basic Cryptocurrency Terminology to Know

As cryptocurrency has been growing over the past decade, industry jargon has developed. This terminology is important to know when starting to purchase and store cryptocurrencies. Here are some of the most commonly used words in the crypto space:

Address

If you’re using bitcoin, you have a public “address” where people can send you bitcoins. If you send someone bitcoins, they will see that they received them from your public address. Anyone can look up that public address and see how many bitcoins are in it.

You also have a private address, which is how you secure your bitcoins. Never give anyone your private address. Addresses are generally made up of a string of alphanumeric characters.

Altcoin

Any cryptocurrency that is not bitcoin is called an altcoin.

Crypto

Crypto is simply a shorter name for cryptocurrency.

Decentralization

As mentioned above, blockchain isn’t owned or controlled by anyone, making it decentralized. Many people in the blockchain space feel that decentralization creates more fairness.

Distributed Ledger

A dispersed recording of replicable, synchronized data. In the case of cryptocurrencies, the blockchain is a distributed ledger shared across many different computers and networks.

Exchange

Websites where you can purchase and sell cryptocurrencies are called exchanges.

Fork

A “fork” is when a blockchain permanently splits into a new version. This can take place when miners vote on a change, when a group takes over 51% of the network and changes the blockchain, or if there’s a bug or more commonly a new set of consensus rules come into existence.

FUD

Fear, uncertainty, doubt. FUD describes the emotions that can create panic and cause people to make decisions that affect the market.

Start buying Bitcoin, Ethereum,
and Litecoin today.

HODL

HODL is the philosophy of holding onto and not selling cryptocurrencies. A misspelling of “hold,” this was a joke that became a common term.

ICO

ICO is short for initial coin offering. An ICO is held when a company is raising funds and sells tokens to public or private buyers who then become backers of the project.

Mining

The computing process used to create crypto tokens. Not all cryptocurrencies are created using mining, but it is a common method.

Multisig

There are ways that you can set up a cryptocurrency transaction which require multiple people to sign off on the transaction for it to go through. This is called a multisig transaction.

Peer to Peer

A peer-to-peer (more commonly abbreviated as “P2P”) system doesn’t have a central controller; instead, users interact directly with one another. For example, there are peer-to-peer exchanges where you can sell your bitcoins directly to someone in your local area.

Pumping

When cryptocurrency information gets sensationalized in the media to raise its price or popularity, this is called pumping.

Smart Contract

Smart contracts are coded contracts written into blockchains that allow automated transactions to be executed.

Wallet

Cryptocurrencies are stored in virtual “wallets.” If you keep your cryptocurrencies on an exchange, that exchange controls your wallet. You can also use a digital wallet such as an app on your phone or computer.

One popular form of cryptocurrency wallet is a hardware wallet, which is like a flash drive that stores your cryptocurrencies offline but allows an easy connection to your computer for transacting. There are also paper wallets, which are (believe it or not) simply written records of your public and private addresses for your cryptocurrency. Online wallets are called hot wallets, while offline wallets are called cold wallets or cold storage.

Whale

A person who owns a significant amount of a cryptocurrency. When that person trades it they can actually affect the market price. These people are called whales.

The Top 10 Largest Cryptocurrencies

There are more than 7,000 cryptocurrencies on the market today, according to estimates. Each of them offers different characteristics in their transaction times, liquidity, privacy, and other factors.

Below are the top 10 biggest by market cap, as of July 23, 2021, according to data from CoinMarketCap, which calculates cryptocurrency market caps by taking the price of a digital currency and multiplying it by the number of coins in circulation.

For instance, with Bitcoin, the world’s biggest cryptocurrency by market cap, the price is $32,439.03 and the circulation supply is 18,764,331 on July 23, 2021. Multiplying the two numbers gets a market cap of about $609 billion. CoinMarketCap does this with the biggest cryptocurrencies and then ranks by the market cap of each.

Recommended: Top 30 Crypto By Market Cap

1. Bitcoin

As the first to market, Bitcoin (BTC) continues to be the most popular and highest valued crypto. Any new industry development — including physical ATMs and crypto credit cards — generally works with Bitcoin first.

Major companies now accept Bitcoin, but Bitcoin has a scalability issue, in that it currently can only process seven transactions per second. Visa®, by contrast, can process a maximum of 24,000 per second. Work is being done to improve this transaction speed, but for now Bitcoin may not be the best long-term store of currency to buy your latte with.

2. Ethereum

Although ethereum (ETH) is a cryptocurrency — also known as ether — its main appeal stems from its software platform. The Ethereum network allows for the creation of smart contracts and decentralized applications to be built on it. The cryptocurrency is used to develop and run applications on the software platform, and by investors purchasing other tokens using ether.

3. Tether

Tether (USDT) was the first cryptocurrency marketed as a “stablecoin” – virtual money designed to maintain a fixed value. In the case of Tether, the value of the coin is pegged to a fiat currency – the U.S. dollar. Hence, its ticker is USDT.

In February 2021, the New York attorney general’s office settled a two-year investigation on tether and its sister crypto exchange Bitfinex. Tether had claimed that all its tokens were backed on a one-to-one basis by U.S. dollars in cash reserves.

4. Binance Coin

Binance is the world’s largest cryptocurrency exchange–popular because of its low trading fees. Binance Coin (BNB) is the cryptocurrency “native” to the exchange, which means that it was designed specifically to be used in the Binance ecosystem. Binance Coin launched in 2017 with an ICO.

Binance tries to incentivize investors to use Binance Coin by allowing them to get a 25% discount on trading fees if they use BNB to pay for trades.

5. Cardano

While Cardano lacks some features, it’s considered by some market participants to be a work in progress and has potential to be a cheaper alternative to Ethereum in being a basis for DeFi and NFT projects.

A key feature of ADA is that it has a proof-of-stake blockchain. This means the complicated proof-of-work calculations and high electricity usage required for mining coins like Bitcoin aren’t necessary. Instead, all ADA coins are pre-mined. That could make Cardano appealing to investors who have been critical of the environmental costs of cryptocurrencies like Bitcoin.

6. Ripple

Ripple (XRP) was created to be used by existing banking institutions. Ripple network can process 1,500 transactions per second. Unlike Bitcoin and many other cryptocurrencies, XRP is not on a blockchain network. Instead, it’s based on what’s called a “hash tree.”

In 2020, the Securities and Exchange Commission sued Ripple and its executives for allegedly misleading investors in XRP by selling more than $1 billion of the virtual tokens without registering with the regulator.

7. USD Coin

USD Coin (USDC) is a stablecoin powered by Ethereum blockchain that is pegged to the U.S. dollar. After the stablecoin Tether came under regulatory trouble for how much it actually backs in reserves, Circle has said its reserves are evaluated and audited by Chicago-based accounting firm Grant Thornton LLP.

In March 2021, Visa announced that it would allow the use of USDC to settle transactions on its payment network–a sign of mainstream acceptance of the crypto market.

8. Dogecoin

Dogecoin had a meteoric rise in 2021, surging through the month of May. The cryptocurrency was started as a joke by its founders in 2013. One of Dogecoin’s most notable features is that it has a Shiba Inu dog on its symbol.

Dogecoin enjoyed popularity in a pattern similar to the way meme stocks did in 2020. Tesla CEO Elon Musk was an advocate of Dogecoin, touting it on social media. On June 1, cryptocurrency exchange Coinbase said it would accommodate Dogecoin, signalling more mainstream acceptance of the cryptocurrency.

9. Polkadot

Polkadot’s coin is called dot (DOT). Polkdot’s creator Gavin Wood is also the co-founder of Ethereum. He wrote the original white paper for Polkadot in 2016.

Central to Polkadot are “parachains” — blockchains that can run higher transaction throughput than Ethereum through design. “Parallel blockchains” — transactions that are spread across multiple computers, similar to parallel processing — have also been touted as having potential as an alternative to Ethereum.

10. Binance USD

Binance USD (BUSD) is a stablecoin that is issued by Binance, the world’s largest cryptocurrency exchange. It’s pegged to the U.S. dollar on a one-to-one basis. It runs on the Ethereum network so can be accepted everywhere for payments or loans where other ERC-20 tokens are.

The Takeaway

Cryptocurrencies can be purchased on major cryptocurrency exchanges or crypto trading platforms. While the digital-asset market is new, trendy and could be a growth opportunity, it’s important for investors to understand that it’s also highly speculative and that all the issues related to safety and security haven’t been worked out.


On SoFi Invest®, investors can trade cryptocurrencies with as little as $10. Their first purchase of $50 or greater will get them a bonus of up to $100 in bitcoin. See full terms at sofi.com/crypto. Cryptocurrencies like Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ethereum Classic can be traded 24/7. Plus, SoFi takes security seriously and uses a number of tools to keep investors’ crypto holdings secure.

Get started trading crypto on SoFi Invest today.



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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN19161

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender