The price of Ethereum has been trapped in a rut for the past few months, with even the most bullish traders conceding defeat. It was a foregone conclusion that the chances of trading above $4k were extremely slim.
Of course, most cryptocurrency traders are known for their optimism, so it’s not surprising that they’re predicting another $4,87 high, although this appears to be a bit of a stretch.
Despite the market’s current negative patterns, there are plenty of reasons to remain mildly positive over the next several months. It has also been determined that using a long condor with call options might provide a beneficial outcome.
Traders of Ethereum Have Been Optimistically Holding Prices
For the Ethereum market, the options market offers a lot more freedom in terms of developing unique strategies and the fact that there are just a few instruments accessible.
On the one hand, the call option protects the buyer from rising prices, whereas the protective put option protects the seller from falling prices. Most traders will sell derivatives to create infinite harmful exposure, comparable to a futures contract.
This long condor approach has an expiration date of March 25 and uses a somewhat bullish range.
The exact structure will appear to be applied to the majority of negative expectations, but the scenario typically implies that the majority of traders were hoping for a significant upside. Ethereum was currently trading at $2,677 at the time of the pricing. However, a comparable outcome can usually be attained at any price level.
The Investor Might Create Upside Limitations With Options Methods
Options markets provide you greater flexibility in developing your own strategy, and you may select between two products.
The protective put option protects the buyer against price declines on the downside, whilst the call option protects the buyer from price rises on the upside. Traders can also offer derivatives with indefinite negative exposure, similar to a futures contract.
This long condor approach has a slightly bullish range and is slated to expire on March 25. A similar structure may be used for negative expectations; however, this scenario implies that most traders are seeking opportunities to profit.
When the pricing took place, Ether was trading at $2,677, but a comparable outcome may be reached at any price level.
To build a positive exposure over this price level, the first transaction entails purchasing 5.14 ETH worth of $3,000 call options. The trader must then sell 4.4 ETH contracts of the $3,500 call to restrict profits over $3,500.
The trader must sell 6.65 ETH contracts of the $4,000 call to execute the strategy, capping gains over that price level. Finally, if Ether unexpectedly skyrockets, a $4,500 upside protection call for 5.91 ETH is required to limit losses.
The Plan Strives for a Profit-to-loss Ratio of 3.2 to 1
The approach may appear difficult to implement; however, the needed margin is only 0.175 ETH, which is also the maximum loss. If Ether trades between $3,100 (up 15%) and $4,370, a net profit is possible (up 63 percent).
Traders should keep in mind that the trade might be closed before the March 25 expiration date. The most significant gain in this technique is between $3,500 and $4,000 at 0.56 Ether, which is more than three times the maximum loss.
This technique, unlike futures trading, provides the holder peace of mind because there is no risk of liquidation. It’s also worth mentioning that most derivatives exchanges accept orders as little as 0.10 ETH contracts, implying that a trader might use a lower amount to create the same approach.