How cautiously bullish Bitcoin traders use options to maintain BTC exposure

The Bitcoin (BTC), traders seem undecided about the next step. This is evident in the price fluctuating between $58,400 to $63,400 over 14 days. Although there are bearish signals from the US regulatory front, investors can also expect more positive news given the Bitcoin exchange-traded fund (ETF), which has assets under management of $1.2 billion.

Coinbase: Bitcoin price in USD Source: TradingView

November 5th, CryptoQuant’s report confirmed that whales are responsible for the majority of recent selling pressure. On-chain monitoring resource focused on the “exchange whale proportion” — the percentage inflows from the largest wallets. It showed a clear rise from the middle October to today.

The U.S. Treasury Department also urged Congress on Nov. 1 to quickly pass legislation to ensure payment stablecoin issuesrs are regulated in the same way as U.S. banks. The report recommends that stablecoins be issued only by “entities that have insured depository institutions.”

However, institutional money managers were able to add $2 billion worth Bitcoin via mutual funds in October. According to the Oct. 31 CoinShares report, ProShares Bitcoin Strategies ETF, which was launched on Oct. 19, saw $1.2 billion in inflow.

Optional trading allows traders to place bets on both bullish and bearish movements

Contrary to popular belief derivative markets weren’t designed for excessive leverage and gambling. Over the past five decades, derivatives trading is a well-established practice. In recent years, institutional traders have begun shifting their focus to cryptocurrency.

Bloomberg reported that Nancy Pelosi’s husband, Paul Pelosi was trading options for $4.8 million. Paul Pelosi, Google’s parent company reported that he exercised call options to purchase 4,000 shares of Alphabet at a strike price $1,200 in a financial disclosure on July 2.

Options trading offers investors different opportunities to make money. Investors can profit from volatility and maximize gains if the price stays within a certain range. They also have protection against sharp price drops. Options structures are complex trades that involve more than one instrument.

How to limit your losses and maximize your gains

Cointelegraph has previously published an article on options trading that explains the intricacies of these options and the advantages over futures trading.

The “risk reversal” options strategy can be used to hedge against losses due to unexpected price swings. An investor can benefit from long-term options but must sell the put to make the payments. This setup reduces the risk of stock trading sideways, but it does carry significant risk if the asset trades lower.

Estimate profit and loss. Source: Deribit Position Builder

Although the trade above is only focused on Dec. 31 options but investors will see similar patterns with different maturities, To protect against a downturn, you need to first buy 2.45 BTC put (sell) $44,000 options contracts.

To increase the returns, the trader sells 2 BTC puts (sell) $54,000 options contracts. For positive price exposure, buy 2.20 call (buy 85,000 options contracts).

This options structure gives no gain or loss of $54,000 (down 11.5%) or $85,000 (up 39%). The investor bets that Bitcoin’s price will rise to above this level on December 31 at 8:00 AM UTC. He also gains exposure to unlimited gains and a maximum loss of BTC 0.455.

This options structure is free, but there will be a margin deposit required to cover any losses. Remember that the minimum trade for most derivative exchanges is 0.10 BTC.

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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