These Two Options Strategies Can Help to Hedge Bitcoin Trades
Scroll DownUnless you are an extremely active cryptocurrency day trader, you may not be liking what you see happening in the markets these days. The Bitcoin exchange-traded funds (ETFs) currently listed on Wall Street have not yet matured to the point of eliminating volatility, and things are getting hectic for traders who keep an eye on rising inflation as well as the ongoing issues with the global supply chain. In other words, the need for hedging market positions has become more pressing than ever.
As you contemplate what your next Bitcoin move should be, consider the "long condor" or "iron condor" strategies, which can yield profit potentials that shave away the risk. Traders who have recently applied these strategies realized a 17% gain on the $53,500 strike price. Those who decide to ride the BTC bear to $53,500 can also buy and sell call options at will, adding an additional dynamic to the strategy.
As of this writing, BTC/USD is down 2.23% on the day to trade at $57,633, according to data from Bitfinex. Bitcoin’s “long condor with call options” strategy yields optimal returns from $53,500, or a 12% downside move, with very little downside risk, according to BitMEX.
In order to take advantage of this, traders must be willing to buy calls and sell options in the Bitcoin market at a deep discount. These deep discount call option positions, priced in BTC/USDC, are the equivalent of buying BTC/USD call options, as they’re priced in dollars but settled in a stablecoin, which in turn can be easily converted to dollars without having to worry about excessive fees.
However, buying BTC/USDC call options at a discount is the equivalent of buying and selling both BTC/USD and USDT/BTC call options simultaneously. This makes BTC/USDC a particularly interesting tool for BTC/USD traders, but even a broader approach can generate profit in the future, as the market decides to rotate back to Tether.
Tether was the primary tool used to create the initial explosion in Bitcoin, as its stablecoin was traded for USD in exchange for the more volatile BTC, and used as a store of value when investors expected Bitcoin to grow in value. While it has continued to perform well, in the short term Tether has provided some price stability in the face of the market volatility.
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