Here is how Bitcoin options traders prepare for BTC ETF approval


Few events can shake up the cryptocurrency market in a sustainable manner, thereby truly pushing the prices of Bitcoin and altcoins into sharp, directional changes.An example is when Chinese President Xi Jinping called for The development of blockchain technology National in October 2019.

Unexpected news caused Bitcoin to skyrocket 42% (Bitcoin), but as investors realize that China has not changed its Negative stance on cryptocurrenciesTherefore, only a few token prices focusing on China’s financial technology industry, blockchain tracking and industry automation have consolidated at a higher level.

Some “crypto news” and regulatory developments have had a lasting impact on investors’ perceptions and willingness to interact with the crypto market. Not all of these are positive.Take the launch of the Chicago Mercantile Exchange (CME) as an example Bitcoin futures in December 2017Experts said that this burst the “bubble” and led to a bear market for nearly three years. Despite this result, the positive thing is that institutional investors finally have a regulated tool to bet on cryptocurrencies.

Tesla February 2021 Announced that it has invested 1.5 billion U.S. dollars Bitcoin has effectively changed the perception of reluctant corporate and institutional investors and validated the “digital gold” argument. Even if the price soars to a record high of $65,000 and falls back all the way to $29,000, it will help establish a support level in terms of price.

Believe it or not, investors have been expecting the US Securities and Exchange Commission to approve Bitcoin futures exchange trading tools Since July 2013, When the Winklevoss brothers applied for their “Bitcoin Trust”.

Grayscale’s Bitcoin Trust (GBTC) is finally able to March 2015, but Many restrictions have been imposed on these tools, restricting the access of investors.

A potential positive price trigger is coming

With this in mind, the effective approval of the US-listed ETF by the US Securities and Exchange Commission may become one of the events that will change the price of Bitcoin forever. By expanding the realm of potential buyers to basic assets, this event may become a trigger for BTC to become a multi-billion dollar asset.

Bloomberg ETF analysts Eric Balchunas and James Seyffart released an investor report on August 24, suggesting that the approval of the US Securities and Exchange Commission may come Fastest OctoberAlthough people can use futures contracts to leverage their long positions, if there is a sudden negative price change before approval, they will be at risk of being liquidated.

Therefore, professional traders may choose option trading strategies like “Long Butterfly”.

By trading multiple call (buy) options on the same expiry date, you can obtain a gain 3.5 times higher than the potential loss. The “long butterfly” strategy allows traders to profit from the rise while limiting losses.

It is important to remember that all options have a set expiry date, therefore, the price of the asset must appreciate within the specified time.

Use call options to limit downside

The following is the expected return of using Bitcoin options when they expire on October 29, but this method can also be applied in different time frames. Although the cost will be different, the overall efficiency will not be affected.

Profit and loss estimates. Source: Deribit Position Builder

This call option gives the buyer the right to purchase assets, but the contract seller will receive (potential) negative risks. The long butterfly strategy requires the use of a short position of $70,000 call options.

To begin execution, the investor bought 1.5 Bitcoin call options with a strike price of $55,000 and sold 2.3 contracts of the $70,000 call options. To complete the transaction, a 0.87 BTC contract with a $90,000 call option should be purchased to avoid losses exceeding this level.

Derivatives are exchanged for price contracts on Bitcoin terms, and the price at the time of applying this strategy is $48,942.

Trading ensures limited downside space and may get 0.25 BTC in profit

In this case, any result between US$57,600 (an increase of 17.7%) and US$90,000 (an increase of 83.9%) will generate a net profit. For example, a 30% increase in price to $63,700 will result in a gain of 0.135 BTC.

At the same time, if the price falls below $55,000 on October 29, the maximum loss is 0.07 BTC. Therefore, the potential benefit of the attractiveness of the “Long Butterfly” is 3.5 times the maximum loss.

Overall, this transaction produces better risk-reward results than leveraged futures trading, especially when considering the limited downside. For those who hope to get ETF approval sometime in the next few months, this is undoubtedly an attractive bet. The only upfront fee required is 0.07 Bitcoin, which is enough to cover the maximum loss.

The views and opinions expressed here only represent author It does not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risks. When making a decision, you should conduct your own research.