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
'The risks outweigh the benefits' of a Swiss CBDC, says SNB governing board member
Andréa Maechler, a member of the governing board for the Swiss National Bank, or SNB, has reportedly altered her position on the central bank issuing a...
Tether freezes $150 million in USDT
Tether has added three more Ethereum addresses, holding more $150 million worth of the USDT stablecoin between them, to its blacklist.As a centralized company,...
OpenSea raises $300M for encrypted digital marketplace
The nonfungible token (NFT) market is gaining momentum as the next frontier in collectibles, gaming and the metaverse. To accelerate this vision, OpenSea...
Fed chair Jerome Powell says he isn't concerned about crypto disrupting financial stability in the US
United States Federal Reserve chair Jerome Powell hinted that though the government agency should consider monitoring developments in the crypto space,...
Miami will hand out free Bitcoin to residents from profits on city coin
Every Miami resident with a digital wallet will be eligible to receive a Bitcoin dividend according to Mayor Francis Suarez. “We’re going to be the very...
Truly decentralized finance will be beyond siloed blockchains
“Yahoo users will not be able to interact via mail with Google email (Gmail) users,” — If tomorrow’s headlines sounded like this, the earth would come to...
Compound crisis averted? Securing exposed COMP could be just the start
As the decentralized finance (DeFi) market continues to pique the interest of investors across the globe, a few incidents have shone a major spotlight on...
China's top regulators ban crypto trading and mining, bitcoin stumbles
By Alun John, Samuel Shen and Tom WilsonSHANGHAI (Reuters) -China's most powerful regulators on Friday intensified the country's crackdown on cryptocurrency...
Bitcoin price overcomes $50K, stocks slide after disappointing US jobs report
The S&P 500 slid to the intraday highs of Sept. 2 while Bitcoin (BTC) climbed to its highest levels in more than three months. The moves came as a key report...
XinFin (XDC) hits a new ATH after fresh partnerships and exchange listings
Enterprise adoption of blockchain technology is an important long-term goal of the cryptocurrency community because the integration of digital currencies...
US State Department offers up to $10 million in crypto rewards to white hat hackers
The United States government is offering rewards in cryptocurrency for information relating to the operations of enemy state-backed hackers or suspected...
Neon Labs deploys cross-chain Ethereum Virtual Machine on Solana
Blockchain developer Neon Labs has created a compatibility bridge between Ethereum and Solana, opening the door to more cross-chain development opportunities...
Germany commemorates Euro 2020 soccer team with NFTs
The German Football Association (DFB) has officially announced the debut of national soccer team nonfungbile tokens (NFTs) in partnership with a major blockchain-based...
Bitcoin funding rate flips negative after $48K retest — Was it a bear trap?
As Bitcoin (BTC) lost the $52,000 support on April 22, the futures contracts funding rate entered negative terrain. This uncommon situation causes the shorts,...
Facebook Messenger Users Targeted by Cryptocurrency Viral Miner
Experts from the Trend Micro Company recorded a new activity during which malicious actors have been distributing the Monero cryptocurrency miner called...