The world 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. Entitled the “covered strangle” method, this daring approach deserves particular attention.
Understanding the “covered strangle” method
The “covered strangle” method combines the sale of a call option and a put option on the same underlying asset, in this case bitcoin. This strategy allows investors to earn premiums on both options, thereby increasing their overall return. But how does it work in practice?
By selling a call option, investors protect themselves against price increases, while ensuring additional income thanks to the premium received. At the same time, selling a put option provides a hedge against price declines, also generating a premium. By combining these two positions, investors can enjoy a dual source of income, while limiting their exposure to extreme market fluctuations.
Markus Thielen, 10X Research, recommends a specific tactical approach: sell a call option with a strike price of $100,000, about 50% above the current bitcoin price, and a put option with a strike price of 50 000 dollars. These options are due to expire in December 2024, reflecting a vision of long-term gains.
Maximize returns with a long-term vision
The covered strangle strategy is particularly suited to bull markets, where gradual increases in the price of bitcoin are expected. This approach relies on low implied volatility, making it an ideal recipe for steady and sustainable growth.
Through this method, investors can benefit from solid downside protection of up to 17%, while increasing their potential return based on the performance of bitcoin between now and December 2024. Indeed, if the price of bitcoin remains stable or increases slightly, the premiums received on the options will be added to the gains from the main investment.
However, it is crucial to manage the risks associated with this strategy. In the event of a significant decline in bitcoin below the put option strike price ($50,000), both the long bitcoin position and the short put option position can result in significant losses. Thus, it is essential for investors to monitor the market carefully and adjust their strategy accordingly.
Analysis of the current bitcoin market
Currently, bitcoin is hovering around $66,000, showing a slight decline. However, bitcoin trading volume increased by 48%, reaching $23 billion, highlighting its strong presence in the market. Bitcoin's market capitalization is equally impressive, standing at $1.31 trillion.
These figures demonstrate the robustness of bitcoin as an investment asset, despite short-term fluctuations. For investors adopting the “covered strangle” strategy, this data is particularly encouraging. A continued 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 you to collect additional premiums and increase the overall return on the investment.
However, it is essential to remain vigilant against potential risks and adjust the strategy according to market developments. With careful analysis and rigorous risk management, the covered strangle method can prove to be a powerful weapon in the arsenal of crypto investors.
Ultimately, bitcoin continues to stand out as a dynamic and promising investment asset. For those who dare to adopt bold, 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 world of cryptocurrencies. In the meantime, China is getting rid of the dollar.
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