In the world of investments there are many alternatives that can make you win or lose money, it depends on whether you know how to handle them properly. In this case we want to introduce you to one that could work in Bitcoin options trading, known as Long Condor.
According to Willy woo, a popular cryptocurrency analyst, the exits of exchanges and the accumulation of miners and whales of BTC suggest that the price of Bitcoin will reach the range of US $ 50K to $ 65K in the future. Nonetheless, long-term Bitcoin bulls and options still make very bullish bets, but even they must admit that the chance of (BTC) trading for more than $ 60K in the coming months is slim.
Many traders have added leveraged long positions via futures contracts to chase the elusive all-time high, but this seems like an unrealistic result. The Long Condor options strategy allows traders to place bullish bets without taking any liquidation risks.
What the Long Condor strategy means for Bitcoin bulls
This Long Condor strategy was set for the expiration of September 21 and uses a slightly bullish range. The same basic structure can also be applied for bearish expectations, but we will assume that most traders are looking for bulls.
For bull traders who think the price of Bitcoin will break higher, but are unwilling to face the liquidation risks imposed by futures contracts, the ‘Long Condor with call options’ strategy could produce more optimal results.
Options markets provide more flexibility to develop custom strategies and there are two instruments available. The call option gives the buyer upside price protection, and the put protection option does the opposite. Traders can also sell the derivatives to create unlimited negative exposure, similar to a futures contract.
How does it work?
The first trade requires buying $ 42,000 call options worth 1.20 Bitcoin to create positive exposure above this price level. Then, to limit profits above $ 46,000, the trader must sell 1.1 BTC contracts out of the $ 46,000.
To complete the strategy, the trader must sell 1.3 BTC contracts of US $ 56,000, limiting profits above this price level. Then a protection call to the upside of $ 60,000 for 1.22 BTC is needed to limit losses if Bitcoin unexpectedly spikes.
The strategy may seem complicated to execute, but the required margin is only 0.0265 BTC, which is also the maximum loss. The potential net gain occurs if Bitcoin is trading between $ 42,950 and $ 59,450.
Traders should remember that it is also possible to close the position before the expiration of September 21 if there is sufficient liquidity. The maximum profit occurs between US $ 46K and US $ 56K at 0.0775 BTC, almost three times higher than the potential loss.