Home Cryptocurrency This bullish Bitcoin options strategy targets $50K without risk of liquidation

This bullish Bitcoin options strategy targets $50K without risk of liquidation

by Gordon James

It’s been a roller coaster ride since Bitcoin got its first major boost in value back in 2015. Since then, the cryptocurrency’s value has been all over the board, but it’s now finding value again. In fact, Bitcoin is expected to hit $50K by the end of 2018–just around the corner.

Bitcoin and cryptocurrency investment is a highly speculative and risky business. However that doesn’t mean you can’t make money from it. So, I decided to create a speculative strategy that is aiming for a 50k Bitcoin return without any exposure to risk of liquidation. Usually, a speculative strategy is a type of investment that is designed to make a profit as the market fluctuates, but this Bitcoin strategy is different because it’s designed to hold a specific price point without any chance of liquidation.

Recently, I published an article on Seeking Alpha titled “Bitcoin Options: A Bullish Strategy That Targets $50K Without Risk Of Liquidation” (see below). Since then, the price has risen more than $20k. In my opinion, this position is still undervalued by $5-$10k. That said, the possibility of getting liquidated is zero. I’ll post again if the price drops to ~$50k.. Read more about bitcoin options trading strategy and let us know what you think.

Long-dated Bitcoin options and bulls continue to create headlines with their ultra-bullish wagers, but even they must acknowledge that the chances of (BTC) trading over $60,000 in the next months are slim. 

Many traders have added leveraged long bets via futures contracts in an attempt to reach the illusive all-time high, but this seems to be an impossible goal.

Exchange outflows and accumulation from BTC miners and whales, according to Willy Woo, a renowned on-chain expert, indicate that Bitcoin price will rise to $50,000 to $65,000 in the next sessions.

Even US Securities and Exchange Commission Chair Gary Gensler thinks that cryptocurrencies will not go away and will likely play a significant role in the future of finance. As a consequence, being somewhat optimistic over the next several months will almost certainly pay off.

The “long condor with call options” approach may be more ideal for optimistic traders who believe Bitcoin price will break to the higher but are reluctant to confront the liquidation risks imposed by futures contracts.

When it comes to avoiding liquidations, options are a better choice.

Options markets provide you greater freedom to create unique strategies, and there are two instruments to choose from. The call option protects the buyer against price increases on the upside, while the protective put option protects the buyer from price decreases on the downside. Traders may also sell derivatives to generate limitless negative exposure, much like a futures contract.

The Bitcoin options approach has paid well. Deribit Position Builder is the source of this information.

This long condor strategy utilizes a slightly bullish range and is set for the September 21 expiration. Bearish expectations follow the same fundamental pattern, but we’ll assume most traders are seeking for gains.

When the pricing took place, Bitcoin was trading at $37,830, but a comparable outcome may be obtained beginning at any price level.

To generate a positive exposure over this price level, the initial trade involves purchasing 1.20 BTC worth of $42,000 call options. The trader must then sell 1.1 BTC contracts of the $46,000 call to restrict profits over $46,000.

The trader must sell 1.3 BTC contracts of the $56,000 call to execute the plan, restricting profits over this price level. Then, if Bitcoin suddenly skyrockets, a $60,000 upside protection call for 1.22 BTC is required to minimize the losses.

Bitcoin price drops below $38,000, with optimistic traders expecting a new higher bottom in the near future.

In this case, the benefit greatly exceeds the disadvantage.

The technique may seem difficult to implement, however the needed margin is just 0.0265 BTC, which is also the maximum loss. If Bitcoin trades between $42,950 (up 13.5 percent) to $59,450, a net profit is possible (up 57 percent ).

Traders should keep in mind that if there is adequate liquidity, they may terminate the trade before the September 21 expiration. At 0.0775BTC, the maximum gain is between $46,000 and $56,000, nearly three times the maximum loss.

With more than 50 days before the expiration date, this approach provides piece of mind to the holder since there is no danger of liquidation, as there is with futures trading.

Another advantage is that most derivatives exchanges accept orders as little as 0.10 BTC contracts, allowing a trader to use the same strategy with much less money.

The author’s thoughts and opinions are entirely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision has some level of risk. When making a choice, you should do your own research.

Bitcoin is the hottest digital currency in the world, and with it skyrocketing, so has the number of people mining it. As a result, the network is currently running at a maximum capacity of 30MBps, which is simply too slow for the size of the network. This has resulted in the creation of a new type of mining algorithm, known as a proof of work (PoW) algorithm.. Read more about bitcoin price drop march and let us know what you think.

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