Here’s how Ether options traders could prepare for the proof-of-stake migration

Ethereum’s long-awaited transition from proof-of work (PoW), has been delayed yet again. It is expected that it will occur in the second half 2022.

Tim Beiko, an Ethereum developer, stated that it would not be June but rather in the months to come. We are certain that we are in the final chapter on PoW for Ethereum.

Around May, an automated increase in mining difficulty that will make PoW mining less appealing is expected to be activated. It is also known as the “difficulty Bomb” and will eventually render blocks “unbearably slow”, forcing the upgrade of a proof-of stake (PoS), network.

Although this news may have had a negative impact on Ether’s (ETH), it opens up a huge opportunity for those who are betting on the efficiency and potential gains from faster and cheaper transactions.

Although one could leverage long positions with futures contracts, they are susceptible to being liquidated in the event of a sudden price drop before the upgrade. Pro traders will therefore likely choose an options trading strategy such as the “long butterflies”.

Trading multiple call (buy), options with the same expiry date can result in gains up to 3.2x higher than potential losses. Options strategies allow traders to maximize the upside and minimize their losses.

Remember that all options have an expiry date. Therefore, price appreciation for the asset must occur within the set period.

Call options can be used to limit the downside

These are the expected returns for Ether options expiring Sept. 22, but you can apply this method to other time periods. The general efficiency of Ether options will not be affected by the cost variations.

Profit / Loss estimate. Source: Deribit Position Builder

This call option allows the buyer to acquire an asset. However, the contract seller may be subject to negative exposure. A “long butterfly” strategy will require a position with the $5,000 call option.

The investor purchases 14 Ether call options at a strike of $3,500 and simultaneously sells 21 calls for $5,000 to initiate execution. To avoid any losses beyond that level, the trader would need to buy 8 ETH calls of the $7,000 call options.

The price of derivatives exchanges was in ETH, and $2937 was the price at which this strategy was listed.

Trade offers limited downside and a potential gain of 3.2 ETH

This strategy yields a net profit for any outcome between $3.770 (up 28%) or $7,000 (up 139%) — for example, a 40 percent price rise to $4.112 results in a 1.1 ETH increase.

If the Sept. 22 price falls below $3,500, then the maximum loss is 0.99 ETH. The “long butterfly” can yield a gain of up to 3.2 times the maximum loss.

Related: Altcoin Roundup – Analysts share their views on the effects of the Ethereum Merge delay

The trade has a higher risk-to-reward ratio than leveraged futures trading. This is especially true when you consider the potential downside. This trade is attractive for those who expect PoW migration in the next five-months.

It is important to note that there is no upfront fee. This is sufficient to cover all losses.

Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.

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Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

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