For traders undecided about the movement of Bitcoin (BTC), the “long condor with call options” produces optimal results with very low risk. This strategy offers protection up to $ 53,500, which would be a 7% downward movement from the current $ 57,600, and returns a positive result to $ 67,500.
Options markets offer more flexibility to apply custom strategies. Unlike futures, there are two different instruments. The call option offers the buyer upward price protection, while the protective put option offers the opposite.
This long condor strategy has been set for expiration on December 31st and uses a slightly bullish range. The same basic structure can also be applied for other periods or price ranges, although the contract quantities may need a slight adjustment.
Bitcoin was trading at $ 57,600 when this strategy was developed, but a similar result can be achieved starting from any price level. The minimum contract size depends on the derivatives exchange, but the suggested ratio must be maintained to maintain the overall structure of the strategy.
The first trade requires buying 0.54 call option contracts of $ 52,000 to create positive exposure above this price level. Then, to limit the gains above $ 56,000, you need to sell 0.50 BTC call option contracts.
To further limit gains above $ 64,000, another 0.45 call option contracts must be sold. To complete the strategy, upside protection is needed above $ 70,000 by buying 0.41 call option contracts if the price of Bitcoin shoots up.
Risk-reward ratio of 1.50 to 1 is moderately bullish
The strategy may seem complicated to perform, but the required margin is only 0.0152 BTC, which is also the maximum loss. Traders should remember that it is also possible to close the position before the expiration of December 31 if there is sufficient liquidity.
The maximum net profit occurs between $ 56,000 and $ 64,000 at 0.0233 BTC, which is 50% more than the potential loss. With 30 days to expiration date, this strategy gives the holder peace of mind because, unlike futures trading, there is no settlement risk.
Also, having an earnings range that ranges from a 7% downward move to a 17% positive price change seems conservative and covers a decent price range of $ 14,000.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you should do your own research when making a decision.
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