Afraid to buy the dip? Bitcoin options provide a safer way to ‘go long’ from $38K

The past clip Bitcoin (BTC) traded supra $50,000 was Dec. 27, 2021. Since then, 4 months person passed, but traders look somewhat optimistic that ostentation has deed the indispensable threshold to trigger cryptocurrency adoption.

In theory, the 8.5% ostentation successful the United States means that each 5 years, the prices summation by 50%. This fundamentally turns $100 into $66 by slashing 33% of the dollar’s purchasing power.

The U.S. Federal Reserve FOMC gathering is expected to regularisation connected the involvement rates connected May 4, but, much importantly, the FED is expected to denote a programme to offload portion of its $9 trillion equilibrium sheet. Thus, alternatively of supporting indebtedness and owe markets, the U.S. Central Bank volition apt merchantability $95 cardinal worthy of these assets each month.

The consequences could beryllium terrible and hazard markets person priced successful specified a scenario. For instance, the Rusell 2000 mid-capitalization banal marketplace scale is down 16.5% year-to-date successful 2022. Similarly, arsenic measured by the MSCI China index, the Chinese banal marketplace is presently facing a 20% correction year-to-date.

There is nary mode to cognize what volition trigger a Bitcoin bull run, but a study by Glassnode connected April 18 has detected "a ample magnitude of coin supply" accumulating betwixt $38,000 and $45,000. For traders who judge BTC volition scope $50,000 by July, determination is simply a low-risk options strategy that tin beryllium utilized to formed a agelong bullish bet.

The skewed 'iron condor' has a constricted downside

Following the whales and ample investors usually pays off, but astir traders are looking for ways to maximize gains portion besides limiting losses. For example, the skewed 'iron condor' maximizes profits adjacent $50,000 by July by limiting losses beneath $38,000.

Bitcoin options Iron condor skewed strategy returns. Source: Deribit Position Builder

The telephone enactment gives the purchaser the close to get an plus astatine a fixed terms successful the aboriginal and the purchaser pays an upfront interest known arsenic a premium for this privilege.

On the different hand, the enactment enactment provides its purchaser the privilege to merchantability an plus astatine a fixed terms successful the aboriginal — a downside extortion strategy. Meanwhile, selling this instrumentality offers vulnerability to the terms upside.

The robust condor consists successful selling some the telephone and enactment options astatine the aforesaid expiry terms and date. The supra illustration has been acceptable utilizing the BTC July 29 options.

The nett country lies betwixt $40,500 and $60,500

To initiate the trade, the capitalist needs to abbreviated 1 declaration of the $44,000 telephone enactment and different 1.4 contracts of the $44,000 enactment option. Then, the purchaser needs to repetition the process for the $50,000 options, utilizing the aforesaid expiry month.

To support from an eventual downside, 1 should bargain 3.46 contracts of the $38,000 enactment option. Lastly, 1 should bargain 1.3 contracts of the $70,000 telephone enactment to bounds losses supra the level.

This strategy yields a nett summation if Bitcoin trades betwixt $40,500, 4% supra the existent $38,900 price, and $60,500 connected July 29. Net profits highest astatine 0.33 BTC astatine $50,000, but stay supra 0.21 BTC betwixt $43,200 and $53,400.

Meanwhile, the maximum nonaccomplishment is 0.21 BTC successful either utmost if connected July 29 Bitcoin terms trades beneath $38,000 oregon supra $70,000, some of which look alternatively unlikely.

The views and opinions expressed present are solely those of the author and bash not needfully bespeak the views of Cointelegraph. Every concern and trading determination involves risk. You should behaviour your ain probe erstwhile making a decision.