Perhaps if the price of BTC may be stabilizing or even hitting a short-term high, professional traders continue to use options to make money.
Although fluctuations in the price of Bitcoin (BTC) may be tough to forecast, there is a method that is regularly employed by professional traders that offers great returns at low expense.
Leveraged futures contracts, which are prone to forced liquidations, are often used by retail traders. But for those looking to maximize earnings while minimizing losses, trading Bitcoin options offers significant chances.
A technique that can produce returns six times greater than the possible loss may be developed by using several call (purchase) options. Additionally, depending on the expectations of the investors, they might be applied in both bullish and bearish situations.
Neutral market methods have attracted traders’ attention ever since Bitcoin’s advance stalled above $47,000 on March 30 because of the regulatory uncertainty surrounding cryptocurrencies, which has long been a huge setback for investors.
Tips for making money in a sideways market
Even if Bitcoin’s price remains unchanged, a trader may make money using the long butterfly approach. However, it’s crucial to keep in mind that options have a predetermined expiration date. This implies that the intended price outcome must take place during the timeframe given.
This method may be used for options for Ether (ETH) or options with another time period, however the Bitcoin options were set for the April 29 expiration. Although the expenses will vary, their overall effectiveness shouldn’t be impacted as Bitcoin was valued at $47,370 at the time of writing.
Purchasing 7.3 BTC call (buy) options with a $46,000 strike price is the recommended bullish approach in order to profit from a rise in price. Selling 16 Bitcoin call (buy) options at 50,000, on the other hand, results in a negative exposure above that point.
To offset the risk over this price, the trader should purchase 3.9 BTC at $55,000 and 4.8 BTC worth of $52,000 call options.
A net gain is produced by any result between $46,700 (down 1.5%) and $53,500 (up 12.9%). The best case scenario occurs at $50,000 and yields a net gain of 0.47 BTC. The biggest loss for this approach is 0.11 BTC if the price on April 29 trades between $46,000 and $55,000.
This butterfly method has the appeal of allowing the trader to achieve returns that are six times greater than the maximum loss. Considering the restricted downside, it offers a considerably better risk-reward ratio than leveraged futures trading overall.
The sole upfront cost for this options strategy transaction is 0.11 BTC, which also represents the maximum loss. It offers potential gains even if Bitcoin’s price remains unchanged.