This clever Bitcoin options strategy brings pro BTC traders big profits

This clever Bitcoin options strategy brings pro BTC traders big profits

Bitcoin's (BTC) upcoming March 26 options expiry might become the largest ever, with $6.1 billion open interest on the line. With less than 4 days ahead of the settlement date, pro investors will have already set up strategies for the next month.

This clever Bitcoin options strategy brings pro BTC traders big profits
Bitcoin price at Coinbase, USD. Source: TradingView

As BTC price has already surged 72.7% since February, most traders are skeptical of another rally taking place over the next couple of weeks. Nevertheless, the $55,000 support has shown strength and is a signal that the uptrend is intact.

Our top trading bots

Whales and arbitrage desks are somehow optimistic, as reflected by the futures contracts premium and top traders' long-to-short ratio. The excitement seems more restrained as opposed to mid-March, when the futures premium reached 35% annualized.

This clever Bitcoin options strategy brings pro BTC traders big profits
OKEx 3-month future contracts basis. Source: Skew

Options strategies do not face liquidations ahead of expiry

Options strategies provide excellent opportunities for traders who have a fixed-range target for an asset. Using leveraged futures contracts also allows traders to leverage the position, although the stop loss decreases the trade's viability.

On the other hand, a trader can create a slightly bullish strategy using multiple put (sell) options. The front spread with puts allows gains with no upfront cost other than the margin requirements for a negative price swing. The same pattern can be used in both bullish and bearish circumstances, depending on the investor's expectations.

It's important to remember that options have a set expiry date; therefore, the price increase must happen during the defined period.

The Bitcoin calendar options below are for the April 30 expiry, but this strategy can also be used on Ether (ETH) options or a different time frame. Although the costs will vary, its general efficiency should not be affected.

This clever Bitcoin options strategy brings pro BTC traders big profits
Profit / Loss estimate. Source: Deribit Position Builder

The suggested slightly bullish strategy consists of buying 0.9 BTC worth of $76,000 put options while simultaneously selling 2.05 of $64,000 puts. To finalize the trade, one should buy 1.31 BTC worth of $48,000 put options.

It is worth noting that derivatives exchanges price these contracts in BTC terms. Thus, the displayed profit and loss above are shown in satoshis (1/100,000,000 BTC) at the expiry date.

While this put option gives the buyer the right to sell an asset at a predetermined price, the contract seller is committing to buy it. Therefore, put options can also be used for neutral-to-bullish strategies.

This front spread with puts could yield a $10,770 gain

As the estimate above shows, any outcome between $54,600 (down 4.3% from the current $57,050) and $76,000 (up 33.2%) yields a net gain. For example, a 10% price increase to $62,750 results in a $9,350 net gain, or BTC 0.149. Meanwhile, this strategy's maximum loss is $7,600 if BTC trades at $48,000 (down 15.9%) on April 30.

This front spread with put options produces a potential $10,770 gain at $64,000, which is 2.85x more than the loss if BTC price drops 10% to $51,350 on the expiry date.

The multiple options strategy trade provides a better risk-reward for bullish traders seeking exposure to BTC's price increase. Moreover, there is no upfront fee apart from the 0.157 BTC margin requirements to cover potential losses.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Keep reading upon Cointelegraph
Europe awaits implementation of regulatory framework for crypto assets
The global landscape of crypto-asset regulations is diverse and, even though it is getting more complex, many regulators are still choosing to wait and...
Swiss Stock Exchange SIX and Borse Xetra list physically backed Ether ETP
New York-based exchange-traded product sponsor and asset manager WisdomTree is expanding its digital assets range with the launch of a new Ether (ETH) exchange-traded...
DEX volumes continue to surge even as Bitcoin and altcoins correct
Decentralized finance (DeFi) started 2021 by taking the cryptocurrency sector by storm and helping to kick the bull market cycle into high gear as traders...
TeraBlock exchange raises $2.4M to develop crypto newbie-friendly interface
United Kingdom-based crypto exchange TeraBlock announced the completion of a funding round that will reportedly provide an on-ramp for new crypto users.In...
Cardano Tumbles 25% In Rout
Investing.com - Cardano was trading at $1.079454 by 23:39 (03:39 GMT) on the Investing.com Index on Sunday, down 24.82% on the day. It was the largest one-day...
DOGE passes Uniswap and Litecoin to become 8th largest cryptocurrency by market cap
The price of Dogecoin has surged seemingly without any push from prominent figures on social media or major developments in the project. According to data...
Cardano Climbs 11% In Bullish Trade
Investing.com - Cardano was trading at $1.316322 by 09:04 (13:04 GMT) on the Investing.com Index on Tuesday, up 10.95% on the day. It was the largest one-day...
iPhone user blames Apple for $600K Bitcoin theft via fake app
A scam cryptocurrency app on Apple’s app distribution service App Store has reportedly stolen $600,000 Bitcoin (BTC) from one iOS user.Cryptocurrency holder...
Theta's Mainnet 3.0 launch date pushed to June
Crypto-powered esports streaming app Theta’s mainnet 3.0 launch has been delayed until June.In an announcement from Theta Labs, the company stated that...
Time magazine seeks CFO comfortable with Bitcoin and crypto
A new job posting from Time magazine shows the 98-year-old publication is looking for a chief financial officer familiar with blockchain and cryptocurrencies.According...
Tim Draper Predicts Bitcoin Will Cost Quarter of A Million In Four Years
As between April 12 and April, 13 bitcoin saw a sharp increase of over $900, it is no wonder that more BTC bulls will come out with their suggestions...
Blockchain ID For Travelers
The World Economic Forum (WEF), held this year from January 23 to 26, is pleased with exciting results. One of the most unexpected announcements this year...
WWF Uses Blockchain to Uproot Slavery And Illicit Trading in Fishing Industry
Poachers better brace for innovations, which watchdogs are going to use to combat their illicit actions, or even give up on their ‘businesses.’ Recently...
‘Bitcoin is a Fork, Bitcoin Cash is The Authentic Blockchain’ – US Government Scientists
The chicken or the egg? It seems that this question is more than relevant in the crypto sphere. However, the words 'chicken' and 'egg' better be replaced...
NASAA Warns Investors About Cryptocurrencies
North American Securities Administrators Association(NASAA) published an announcement for investors, which warned of the danger of the cryptocurrencies,...