Protect Your Bitcoin Futures with 3.5x Leverage Options Strategy

In the Brief:

  • Bitcoin's bullish price momentum is driven by weakness in the US financial system
  • Cryptocurrency traders are uneasy about the regulatory environment
  • Professional traders use the Iron Condor strategy to maximize gains with limited risk
  • Target profit area is $31,420 to $36,000
  • Investment required is the maximum loss of 0.063 BTC or $1,750

3 - 4 minute read

Bitcoin (BTC) has been the best-performing asset in 2023, gaining over 74% year-to-date at $29,000. However, the $31,000 resistance proved stronger than expected on April 14, disappointing Bitcoin bulls. Despite this setback, Bitcoin investors remain optimistic due to the weakness in the U.S. financial system, namely the $100 billion in quarterly net withdrawals at First Republic Bank and the legislative effort to approve an increase to the urgent $31.6 billion national debt ceiling.

The weakness in the U.S. financial system is indicative of a weaker U.S. dollar as investors increase the odds of recession and further fiscal turmoil for the world’s biggest economy. Cryptocurrency traders remain uncomfortable with the regulatory environment, and the recent statement from the New York Federal Reserve further added to the uncertainty. The guidelines disclosed could potentially hinder the USD Coin (USDC) stablecoin issuer Circle’s access to the Fed’s securities reverse-repurchase program, the safest vehicle to get yield on deposits.

Despite the regulatory uncertainty, professional traders have been using the bullish Iron Condor strategy to maximize gains if Bitcoin breaks above $32,000 in May with limited risk. This strategy involves using options strategies to maximize gains and limit losses. The skewed Iron Condor strategy can yield profits above $31,400 by the end of May while limiting losses if the expiry price is below $31,000.

Bitcoin options Iron Condor strategy returns. Source: Deribit Position Builder

The target profit area is $31,420 (6% above the current $29,730 price) to $36,000 (21.2% above the current price). To initiate the trade, the investor needs to short (sell) 1.5 contracts of the $33,000 call option and 3 contracts of the $33,000 put option. Then, the buyer must repeat the procedure for the $35,000 options, using the same expiry month. Buying 4.8 contracts of the $31,000 put option to protect from an eventual downside is also required. Lastly, one needs to purchase 7.8 contracts of the $36,000 call option to limit losses above that level.

The Bottom Line

The Bitcoin market remains volatile, and traders need to remain cautious in their approach. The bullish Iron Condor strategy could yield profits for traders willing to take the risk, but it is not a guarantee. Investors must conduct their own research and make informed decisions to maximize their gains and limit their losses.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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