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The universe of Bitcoin or crypto in general and savvy investors are always looking for new methods to maximize their profits. An emerging strategy, highlighted by 10X Research, promises optimized returns for Bitcoin holders. Titled the “covered strangle” method, this bold approach deserves special attention.
Understanding the “covered strangle” method
The “covered strangle” method combines the selling of a call option and a put option on the same underlying asset, in this case, Bitcoin. This strategy allows investors to collect premiums on both options, thereby increasing their overall yield. But how does it work in practice?
By selling a call option, investors protect themselves against price increases while securing additional income through the received premium. Simultaneously, selling a put option offers coverage against price decreases, also generating a premium. By combining these two positions, investors can benefit from a dual income source while limiting their exposure to extreme market fluctuations.
Markus Thielen, from 10X Research, recommends a specific tactical approach: selling a call option with a strike price of $100,000, or about 50% above the current Bitcoin price, and a put option with a strike price of $50,000. These options should expire in December 2024, reflecting a long-term vision of gains.
Maximizing returns with a long-term vision
The “covered strangle” strategy is particularly suited to bullish markets, where gradual increases in Bitcoin’s price are expected. This approach relies on low implied volatility, making it an ideal recipe for steady and sustainable growth.
With this method, investors can benefit from a solid protection against downside risks up to 17%, while increasing their potential yield based on Bitcoin’s performance by December 2024. Indeed, if Bitcoin’s price remains stable or slightly increases, the premiums collected on the options will add to the gains of the main investment.
However, it is crucial to manage the risks associated with this strategy. In the event of a significant drop in Bitcoin below the put option’s strike price ($50,000), the long Bitcoin position and the short put option position can lead to substantial losses. Thus, it is essential for investors to closely monitor the market and adjust their strategy accordingly.
Current Bitcoin market analysis
Currently, Bitcoin hovers around $66,000, experiencing a slight pullback. However, Bitcoin’s trading volume has increased by 48%, reaching $23 billion, highlighting its strong presence in the market. Bitcoin’s market capitalization is equally impressive, amounting to $1.31 trillion.
These figures underscore Bitcoin’s robustness as an investment asset, despite short-term fluctuations. For investors adopting the “covered strangle” strategy, this data is particularly encouraging. A continuous increase in trading volume and high market capitalization indicate strong demand and sufficient liquidity to support complex options strategies.
A bold strategy for optimized profits
The “covered strangle” method proposed by 10X Research offers a unique opportunity for Bitcoin investors to maximize their profits while limiting risks. By combining the sale of call and put options, this strategy allows for the collection of additional premiums and enhances the overall investment yield.
However, it is essential to stay vigilant about potential risks and adjust the strategy based on market developments. With careful analysis and rigorous risk management, the “covered strangle” method can prove to be a powerful tool in the arsenal of crypto investors.
In the end, Bitcoin continues to stand out as a dynamic and promising investment asset. For those who dare to adopt bold and well-informed strategies, the rewards can be substantial. The “covered strangle” method could well be the key to unlocking new levels of profits in the fascinating universe of cryptocurrencies. Meanwhile, China is getting rid of the dollar.
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Fasciné par le bitcoin depuis 2017, Evariste n’a cessé de se documenter sur le sujet. Si son premier intérêt s’est porté sur le trading, il essaie désormais activement d’appréhender toutes les avancées centrées sur les cryptomonnaies. En tant que rédacteur, il aspire à fournir en permanence un travail de haute qualité qui reflète l’état du secteur dans son ensemble.
DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.