Bitcoin hit a 2022 low at $17,580 on June 18 and many traders are hopeful that this was the bottom, but (BTC) has failed to produce a daily close above $21,000 for the past six days. For this reason, traders are uncomfortable with the current price action and the threat of many CeFi and DeFi companies facing loss of user funds and possible insolvency weighs on sentiment.
The pullback of venture capital Three Arrows Capital (3AC) defaulting on its financial obligations on June 14 and Asia-based lending platform Babel Finance citing liquidity pressure as a reason to pause withdrawals are just two. of the most recent examples.
This news caught the attention of regulators, especially after Celsius, a crypto lending company, suspended user withdrawals on June 12. On June 16, securities regulators from five states in the United States of America reportedly opened investigations into crypto lending platforms.
There is no way of knowing when sentiment will change and trigger a Bitcoin uptrend, but for traders who believe that BTC will hit $28,000 in August, there is a low-risk options strategy that produces a decent return with limited risk. .
The “Iron Condor” offers returns for a specific price range
Sometimes throwing a “Hail Mary” is worth ten times leverage through futures contracts. However, most traders are looking for ways to maximize profits and limit losses. For example, the skewed “Iron Condor” maximizes profits near $28,000 at the end of August, but limits losses if expiration is below $22,000.
The call option gives its holder the right to acquire an asset at a fixed price in the future. For this privilege, the buyer pays an initial fee known as a premium.
For its part, the put option provides its holder with the privilege of selling an asset at a fixed price in the future, which constitutes a downward protection strategy. On the other hand, the sale of this instrument (put) offers an exposure to the rise in price.
The Iron Condor consists of selling call and put options at the same price and expiration date. The example above has been set using the August 26 contracts, but can be adapted to other time frames.
The target profit zone is $23,850 to $35,250
To start the trade, the investor needs to sell 3.4 contracts of the $26,000 call option and 3.5 contracts of the $26,000 put option. Next, the buyer needs to repeat the procedure for the $30,000 options, using the same expiration month.
You also need to buy 7.9 contracts of the $23,000 put option to protect yourself from an eventual drop. In another 3.3 contracts buy the $38,000 call option to limit losses above the level.
This strategy produces a net profit if Bitcoin trades between $23,850 and $35,250 on August 26. Net profits peak at 0.63 BTC ($13,230 at current prices) between $26,000 and $30,000, but remain above 0.28 BTC ($5,880 at current prices) if Bitcoin trades in the USD range 24,750 and USD 32,700.
The investment required to open this strategy is the maximum loss, thus 0.28 BTC or $5,880, which will happen if Bitcoin trades below $23,000 or above $38,000 on August 26. The benefit of this trade is that a reasonable target area is covered, while providing a 125% return against the potential loss.
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