Are you hesitant to invest in the dip? Bitcoin options provide a safer way to go long from $38K

The previous time Bitcoin (BTC) reached $50,000 was on December 27, 2021. Four months have passed since then, but traders appear to be optimistic that inflation has hit the required mark for cryptocurrency adoption.

In principle, the US inflation rate of 8.5% implies that prices will rise 50% every five years. This effectively lowers the value of $100 to $66 by removing 33 percent of its purchasing power. The U.S. Federal Reserve FOMC meeting is expected to review key interest rates on May 4th, but more significantly,

The damage might be significant, and the markets have priced in such a scenario. The R2K mid-cap stock market index is down 16.5% year to date in 2022, for example. Similarly, as measured by the MSCI China index, the Chinese stock market has already corrected by 20% this year.

There’s no way to tell what will bring on a Bitcoin bull run, but Glassnode discovered a “significant quantity” of coin supply accumulating between $38,000 and $45,000 on April 18. Traders who think that bitcoin will reach $50,000 by July may use a low-risk options strategy to place a long bullish bet.

The limited downside of the skewed ‘iron condor’ –

Following the whales and big investors, on the other hand, pays off most of the time, but most traders are seeking for methods to maximize gains while minimizing losses. For example, by limiting losses below $38,000 throughout July using a skewed “iron condor,” you can maximize your earnings near $50,000.

Bitcoin options Iron condor skewed strategy returns. Source: Deribit Position Builder

The buyer of a call option has the right to buy an asset at a specified price in the future and pays a premium for this privilege. The buyer of a put option, on the other hand, gets the right to sell an item at a set price in the future — an exposure protection strategy.

The iron condor is a strategy in which you sell both the call and put options at the same price and expiration date. The BTC July 29 options in the example above have been used to create the above scenario.

The profit zone ranges from $40,500 to $60,500 –

The investor must first create a short position of 1 contract in each $44,000 call option and another 1.4 contracts in the $44,000 put option. Then, the buyer repeats the procedure for the $50,000 options but with an expiry month different from that of the previous trade.

If Bitcoin’s price rises above $60,500 on July 29, as predicted by the odds, this plan will result in a gain of roughly 5%. On that date, if Bitcoin trades between $40,500 and $60,500 (4% above current prices), you’ll end up with a net profit. Net earnings peak at 0.

Meanwhile, if the Bitcoin price falls below $38,000 or rises above $70,000 on July 29, both of which appear improbable, the maximum loss would be 0.21 BTC in either scenario.

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