Bullish traders use this clever strategy to place low-risk Ethereum option bets


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Ether (ETH) hit higher lows over the course of 2021, and the current trend suggests that $ 1,800 could be the low for April. Even traders and investors who don’t rely on tech specs have become optimists after Visa launched a pilot to process USD Coin (USDC) transactions over the Ethereum network.

Ether price in USD at Coinbase. Source: TradingView

Given that the price of Ether looks like it is ready to hit new annual highs, there are some investment opportunities on the table. Buying and holding is an excellent strategy and leveraged long up to 2x. The problem is on the downside, as a 20% move in futures contracts would result in a 40% loss. Not to mention, there isn’t a lot of room for additional leverage as it requires a substantial advance payment.

Option strategies, on the other hand, offer excellent opportunities for traders who have a set goal. For those who expect a moderate price increase of 15% in 30 days, the “Iron Condor” strategy, for example, offers 12% profit with minimal upfront requirements. This strategy also limits the disadvantage to 10% regardless of how the asset performs.

This bullish strategy is to buy 10 ethers worth $ 1,600 put options while selling the same amount of $ 2,240 calls. To complete the trade, the buyer sells put options worth 7.5 ethers valued at $ 2,080 and settles them by purchasing 8 ether contracts valued at $ 2,880.

In contrast to perpetual futures (inverse swaps), options have a fixed expiry date, so that the expected result must occur during the defined period.

The Ether (ETH) calendar option below refers to the end of April 30th. However, this strategy can also be applied to Bitcoin (BTC) or applied to any other time period.

Derivatives exchanges value these contracts in ether, ie the displayed profits and losses are calculated in ether fractions on the expiry date.

Profit / Loss Estimate. Source: Deribit Position Builder

Given that Ether is currently trading at $ 1,810, any result between $ 1,790 and $ 2,545 (up 40.6%) will result in a net profit. For example, a price increase of 15% to $ 2,080 results in a net profit of 1.2 ETH, or $ 2,500.

The maximum loss of this strategy is 1.04 ETH. This will happen if the price is below $ 1,600 (minus 12%) or above $ 2,545 on April 30th.

The appeal of the Iron Condor strategy is the potential gain of 1.2 ETH, while losses are limited to under $ 1,600 upon expiry.

Overall, this conservative strategy gives a much better risk / return rate than trading leveraged futures due to the limited disadvantage. The upfront cost (deposit) is 1.04 ETH and this also reflects the maximum potential loss.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.