The “long condor strategy with call options” or “iron condor options strategy” is a good option for traders who aren’t sure about Bitcoin’s (BTC). It yields excellent results and has very low risk. This strategy provides protection to as low as $53,500. That’s a 7% decrease from the current $57,000. It also returns positive outcomes up to $67,000.
Options markets offer more flexibility for custom strategies. There are two distinct instruments, unlike futures. The buyer has upside protection from the price of the call option, and the seller can opt for the protective put option.
Strategy returns for Bitcoin options Source: Deribit Position Builder
This long condor strategy was created for Dec. 31 expiry. It uses a slightly bullish range. You can use the same structure for different price ranges or periods, but you might need to adjust the contract quantities.
Bitcoin traded at $57,600 at the time of pricing. However, it is possible to achieve a similar result starting at any price. The minimum contract size depends upon the exchange. However, it is important to maintain the recommended ratio in order to preserve the overall strategy structure.
To create positive exposure at a higher price, the trader must first buy 0.54 contracts of $52,000 call options. To limit gains exceeding $56,000, the trader must sell 0.50 BTC option contracts.
Additional 0.45 call option options should be purchased to limit gains over $64,000. The trader will need to have upside protection of at least $70,000 if Bitcoin prices skyrocket.
Related: Three reasons why Bitcoin dropped to $56.5K
The 1.50-1 risk-reward ratio can be moderately bullish
Although the strategy may sound difficult to implement, the margin required for the trade is only 0.02 BTC. This is the maximum loss. If there is enough liquidity, traders can also close the position before the Dec. 31 expiry.
At 0.0233 BTC, the maximum net gain is between $56,000 to $64,000. This is 50% more than the possible loss. This strategy offers a 30 day window to expire and gives the holder the peace of mind that there is no liquidation risk.
Additionally, a profit range that can vary from a negative 7% move to a positive 17% change in price seems conservative. This covers a reasonable $14,000 price range.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.