Investment

This clever bitcoin capability strategy brings big profits to BTC traders


Bitcoins (BTC) the forthcoming expiry of the 26 March options may become the largest in history, p Open interest on the line $ 6.1 billion. With less than 4 days before the settlement date, professional investors will already have strategies set for next month.

Bitcoin price per Coinbase, USD. Source: TradingView

As the price of BTC has risen by 72.7% since February, most traders are skeptical about the next rally, which will take place in the next few weeks. However, the $ 55,000 support has shown strength and is a signal that the uptrend is intact.

Whales and arbitration tables are somehow optimistic, which is reflected in premium futures contracts and the ratio of long to short traders. The excitement seems to be more restrained, in contrast to mid-March, when the futures premium reached an annualization of 35%.

OKEx 3-month future contracts. Source: Skew

The option strategy does not face liquidation before it expires

Option strategies provide excellent opportunities for traders who have a fixed-scale goal for a given asset. The use of leveraged futures contracts also allows traders to take advantage of the position, although stop loss reduces the viability of the trade.

On the other hand, a trader can create a slightly bullish strategy using more put options. Front spread with put allows for profits without additional initial costs in addition to margin requirements for negative price fluctuations. The same pattern can be used in both bullish and bullish conditions, depending on the investor’s expectations.

It is important to note that the options have an expiration date; the price increase must therefore take place during a defined period.

The bitcoin calendar options below are valid until April 30, but this strategy can also be used on Ether (ETH) options or other timeframe. Although costs will vary, its overall effectiveness should not be affected.

Profit / loss estimate. Source: Deribit Position Builder

The proposed slightly bullish strategy is to buy 0.9 BTC worth $ 76,000 of option sales and a simultaneous sale of 2.05 out of $ 64,000 put. In order to complete the trade, you should purchase 1.31 BTC worth $ 48,000 put options.

It is worth noting that derivatives exchange the prices of these contracts for BTC. The displayed profit and loss above are therefore displayed in satoshi (1 / 100,000,000 BTC) as of the expiration date.

While this sale option gives the buyer the right to sell the asset at a predetermined price, the contractual seller undertakes to buy it. Therefore, put options can also be used for neutral to bullish strategies.

This leading margin with puts could bring in a profit of $ 10,770

As the above estimate shows, any result between $ 54,600 (down 4.3% from the current $ 57,050) and $ 76,000 (up 33.2%) is net income. For example, a 10% price increase to $ 62,750 results in a net profit of $ 9,350, or BTC 0.149. Meanwhile, the maximum loss for this strategy is $ 7,600 if BTC trades for $ 48,000 on April 30 (down 15.9%).

This leading margin with put options produces a potential gain of $ 10,770 to $ 64,000, which is 2.85x more than the loss if the price of BTC drops 10% to $ 51,350 on the expiration date.

Trading with a multi-option strategy provides a better risk-reward for bull traders looking for exposure to increase the price of BTC. Apart from the BTC 0.157 margin requirements, in addition to covering potential losses, there is no upfront fee.

The views and opinions expressed herein are those of an opinion author and does not necessarily reflect the views of the Cointelegraph. Every investment and business move involves risk. You should do your own research when making your decision.



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