Bloomberg analysts expect a BTC ETF approval in the next few months, and clever options traders might use this strategy to profit from the possibility.
Very few events can shake the cryptocurrency markets in a sustainable manner that really sends Bitcoin and altcoin prices into a sharp directional move. One example is when Xi Jinping, China’s President, called for the development of blockchain technology throughout the country in October 2019.
The unexpected news caused a 42% pump in Bitcoin (BTC), but the movement completely faded away as investors realized China was not altering its negative stance on cryptocurrencies. Como resultado, only a handful of tokens focused on China’s FinTech industry, blockchain tracing, and industry automation saw their prices consolidate at higher levels.
Some ‘crypto news’ and regulatory development have a lasting impact on investors’ perceptions and willingness to interact with the crypto market. Not every one of these is positive. Llevar, por ejemplo, the launch of Chicago Mercantile Exchange (CME) Bitcoin futures in Dec. 2017, which experts say popped the ‘bubble’ and led to a nearly 3-year long bear market. Despite this outcome, a positive was institutional investors finally had a regulated instrument for betting against cryptos.
Tesla’s February 2021 announcement that it had invested $1.5 billion in Bitcoin effectively changed the perception of reluctant corporate and institutional investors, and it validated the “oro digital” thesis. Even if the price spiked to a $65,000 all-time-high and retracted all the way to $29,000, it helped to establish a support level price-wise.
Believe it or not, investors have been expecting the United States Securities and Exchange Commission to approve a Bitcoin futures exchange-traded instrument since July 2013, when the Winklevoss brothers filed for their “Bitcoin Trust.”
Confianza de Bitcoin en escala de grises (GBTC) was finally able to list it on OTC markets in March 2015, but numerous restrictions are applied to these instruments, limiting investor access.
A potentially positive price trigger is coming up
Con eso en mente, the effective approval of a U.S. listed ETF from the SEC will likely be one of those events that will alter Bitcoin’s price forever. By expanding the field of potential buyers to the underlying asset, the event could be the trigger that drives BTC to become a multi-billion dollar asset.
Bloomberg ETF analysts Eric Balchunas and James Seyffart issued an investor note on Aug. 24 that suggested that the SEC approval could come as soon as October. Even though one could use futures contracts to leverage their long positions, they would risk being liquidated if a sudden negative price move occurs ahead of the approval.
Por consiguiente, pro traders will likely opt for an options trading strategy like the ‘Long Butterfly.’
By trading multiple call (comprar) options for the same expiry date, one can achieve gains that are 3.5 times higher than the potential loss. The ‘long butterfly’ strategy allows a trader to profit from the upside while limiting losses.
It is important to remember that all options have a set expiry date, and as a result, the asset’s price appreciation must happen during the defined period.
Using call options to limit the downside
Below are the expected returns using Bitcoin options for the October 29 expiración, but this methodology can also be applied using different time frames. While the costs will vary, the general efficiency will not be affected.
This call option gives the buyer the right to acquire an asset, but the contract seller receives (potential) negative exposure. The Long Butterfly strategy requires a short position using the $70,000 call option.
To initiate the execution, the investor buys 1.5 Bitcoin call options with a $55,000 strike while simultaneously selling 2.3 contracts of the $70,000 llamar. Para finalizar el intercambio, uno debería comprar 0.87 Contratos BTC del $90,000 call options to avoid losses above such a level.
Derivatives exchanges price contracts in Bitcoin terms, y $48,942 was the price when this strategy was quoted.
The trade ensures limited downside with a possi 0.25 BTC gain
En esta situación, cualquier resultado entre $57,600 (arriba 17.7%) y $90,000 (arriba 83.9%) yields a net profit. Por ejemplo, un 30% aumento de precio a $63,700 resulta en un 0.135 BTC gain.
mientras tanto, the maximum loss is 0.07 BTC if the price is below $55,000 en octubre 29. Así, the ‘long butterfly’ appeal is a potential gain of 3.5 times larger than the maximum loss.
En general, the trade yields a better risk-to-reward outcome than leveraged futures trading, especially when considering the limited downside. It certainly looks like an attractive bet for those expecting the ETF approval sometime over the next couple of months. The only upfront fee required is 0.07 Bitcoin, which is enough to cover the maximum loss.
Los puntos de vista y opiniones expresados aquí son únicamente los de la autor y no reflejan necesariamente las opiniones de Cointelegraph. Cada inversión y movimiento comercial implica un riesgo. Debe realizar su propia investigación al tomar una decisión.
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