This simple Bitcoin options strategy lets traders profit while also hedging their bets
The “long condor with call options,” or “iron condor” options strategy, delivers excellent outcomes with very minimal risk for traders who are indecisive about Bitcoin’s (BTC) trend. This method provides protection down to $53,500, which is a 7% drop from the current $57,600 and gives a positive result up to $67,500.
Options markets provide you more freedom to create your own tactics. Unlike futures, there are two different instruments to choose from. The call option protects the buyer against price increases on the upside, whilst the protective put option protects the buyer from price decreases on the downside.
This long condor approach has a slightly positive range and is due to expire on December 31. Other times or price ranges can be used with the same basic structure, however contract numbers may need to be adjusted.
When the pricing took place, Bitcoin was trading at $57,600, but a comparable outcome may be reached starting at any price level. The minimum contract size varies for every derivatives exchange, however, the specified ratio must be maintained to maintain the overall strategy structure.
To build positive exposure above this price level, the initial strategy entails purchasing 0.54 contracts of $52,000 call options. The trader must next sell 0.50 BTC call option contracts to restrict profits above $56,000.
The 1.50 to 1 risk-reward ratio is moderately bullish
Another 0.45 call option contract should be sold to further restrict profits beyond $64,000. To execute the strategy, the trader will need to purchase 0.41 call option contracts if the Bitcoin price rises above $70,000.
The technique may appear difficult to implement, however, the necessary margin is only 0.0152 BTC, which is also the maximum loss. Traders should keep in mind that if there is enough liquidity, they can close the trade before the December 31 expiry date.
At 0.0233 BTC, the maximum net gain is between $56,000 and $64,000, which is 50% greater than the maximum loss. With 30 days to expiration, this method provides peace of mind to the holder since, unlike futures trading, there is no chance of liquidation.
Furthermore, a profit range ranging from a 7% price change to a positive 17% price change is prudent and covers a reasonable $14,000 price range.