For traders who are undecided about 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 move from the current $ 57,600, and returns a positive result to $ 67,500.
Options markets provide more flexibility to develop custom strategies. Unlike futures, there are two separate instruments available. The call option offers the buyer upward price protection, while the protective put option offers the opposite.
This long condor strategy was set for expiration on December 31 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 some adjustment.
Bitcoin was trading at $ 57,600 when the price was made, but a similar result can be achieved from any price level. The minimum contract size depends on the derivatives exchange, but it is necessary to maintain the suggested ratio to maintain the overall strategy structure.
The first trade requires buying 0.54 contracts of the $ 52,000 call options to create positive exposure above this price level. Then, to limit profits above $ 56,000, the trader must sell call option contracts of 0.50 BTC.
To further limit earnings above $ 64,000, another 0.45 call option contracts should be sold. To complete the strategy, the trader needs upside protection above $ 70,000 by buying 0.41 call option contracts if the price of Bitcoin shoots up.
Related: 3 Reasons Bitcoin's Drop to $ 56.5K May Have Been Local Bottom
Risk-reward ratio of 1.50 to 1 is moderately bullish
The strategy may seem complicated to execute, 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% higher 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. Every investment and commercial movement involves a risk. You should do your own research when making a decision.
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