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

Exchanges are struggling to keep up with demand for Bitcoin, which has sent the price plummeting. The dip is an opportunity for long term investors looking to buy the dip and speculate on a longer-term bull run.

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The “crypto options trading strategy” is a way to trade in cryptocurrencies without the risk of losing your capital. The option can be used to go long or short on Bitcoin from $38,000.

Bitcoin (BTC) last traded over $50,000 on December 27, 2021. Four months have passed since then, but traders seem to be hopeful that inflation has reached the right level to spur bitcoin adoption.

In principle, 8.5 percent inflation in the United States implies that prices rise by 50% every five years. This effectively reduces the purchase power of the dollar by 33%, turning $100 into $66.

On May 4, the Federal Open Market Committee (FOMC) of the United States is scheduled to make a decision on interest rates, but more crucially, the FED is likely to unveil a scheme to unload a portion of its $9 trillion balance sheet. As a result, rather than supporting the debt and mortgage markets, the Federal Reserve will most certainly sell $95 billion worth of these assets each month.

The ramifications might be disastrous, and risk markets have already factored in such a scenario. In 2022, the Russell 2000 mid-capitalization stock market index, for example, is down 16.5 percent year to date. Similarly, the Chinese stock market has had a 20% year-to-date correction, as assessed by the MSCI China index.

It’s impossible to predict what would set off a Bitcoin bull run, but Glassnode reported on April 18 that “a considerable quantity of coin supply” had accumulated between $38,000 and $45,000. There is a low-risk options method that can be utilized to place a long bullish bet for traders who anticipate BTC will hit $50,000 by July.

The skewed’iron condor’ has very minor drawbacks.

Following the whales and wealthy investors generally pays off, but most traders want to maximize their profits while minimising their losses. The skewed “iron condor,” for example, optimizes gains around $50,000 by July while reducing losses at under $38,000.

Afraid-to-buy-the-dip-Bitcoin-options-provide-a-saferAlternatives to Bitcoin Returns from the Iron Condor approach were skewed. Deribit Position Builder is the source of this information.

The call option offers the buyer the opportunity to purchase an asset at a certain price in the future in exchange for an upfront cost known as a premium.

The put option, on the other hand, gives the buyer the right to sell an asset at a predetermined price in the future — a downside protection strategy. Meanwhile, selling this equipment exposes you to price increases.

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The iron condor is a strategy that involves selling both call and put options at the same time and at the same price. The BTC July 29 options were used in the example above.

The profit ranges from $40,500 to $60,500.

The investor must short 1 contract of the $44,000 call option and 1.4 contracts of the $44,000 put option to begin the transaction. The buyer must then repeat the process for the $50,000 options, using the same expiration month as before.

To hedge against a potential downside, purchase 3.46 contracts of the $38,000 put option. Finally, to prevent losses over the threshold, purchase 1.3 contracts of the $70,000 call option.

If Bitcoin trades between $40,500 to $60,500 on July 29, a 4 percent increase over its current price of $38,900, this method generates a net profit. Between $43,200 and $53,400, net gains reach 0.33 BTC, but stay above 0.21 BTC.

Meanwhile, if the Bitcoin price goes below $38,000 or over $70,000 on July 29, the maximum loss is 0.21 BTC in each direction, which seems implausible.

The author’s thoughts and opinions are purely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision has some level of risk. When making a choice, you should do your own research.

Bitcoin options trading is a way to go long from $38K. Trading bitcoin options provides a safer way to ‘go long’, as they are less volatile than the cryptocurrency itself. Reference: trading bitcoin options.

Related Tags

  • hedging bitcoin with options
  • bitcoin whales buying dip
  • dip in crypto today
  • buy the dip crypto reddit
  • crypto doesn t make sense

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