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Historical data shows that it is almost impossible to consistently predict Bitcoin’s price action and many traders who attempt this end up losing money. Now that Bitcoin is trading near $ 50,000, the ultimate goal for most traders is to hold onto their current holdings and gradually add them in a way that isn’t terribly risky.
Options strategies provide excellent opportunities for traders who have a fixed range target for an asset. For example, using leveraged futures could be a solution for a scenario where prices are expected to increase by up to 28% over the next month. Of course, using a tight stop loss decreases the viability of the trade.
On the other hand, the use of multiple call options can create a strategy that allows for winnings four times greater than the potential loss. These can be used in both bullish and bearish circumstances, depending on investor expectations.
The long butterfly strategy allows a trader to profit from the upside while limiting losses. It is important to remember that options have a fixed expiration date; therefore, the price increase must occur during the defined period.
The Bitcoin (BTC) calendar options below are for the March 26 expiration, but this strategy can also be used on Ether (ETH) options or any other time frame. Although the costs vary, its overall effectiveness should not be affected.
The suggested bullish strategy is to buy 1 BTC worth $ 48,000 call options while simultaneously selling double that $ 56,000 call amount. To complete the transaction, you need to buy 1 BTC worth $ 64,000 in call options.
While this call option gives the buyer the right to acquire an asset, the contractual seller gets negative (potential) exposure.
As the estimate above shows, if BTC is trading for $ 48,700, any result between $ 49,380 (up 1.5%) and $ 62,630 (up 28.6%) gives a net gain. For example, a 10% price increase to $ 53,570 results in a net gain of $ 4,000. Meanwhile, the maximum loss for this strategy is $ 1,350 if BTC trades below $ 48,000 or above $ 64,000 on March 26.
This appeal of this butterfly strategy is that the trader can get a gain of $ 4,050, which is 3 times the maximum loss, if BTC trades from $ 53,550 to $ 58,460 on expiration.
All in all, it gives a much better risk / reward of leveraged futures trading given the limited downside.
Multiple options strategy trading offers better risk-reward for bullish traders looking for exposure to increasing BTC prices and the only upfront fees required are the $ 1350 which reflects the maximum loss if the price is lower at $ 48,000 or greater than $ 64,000 on the expiration date.
The opinions and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You need to do your own research when making a decision.
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