The price of Ether (ETH) has spent the last two months in a doldrums and even the most optimistic trader will admit that the chance of trading above $4400 in the coming months is slim.
Of course, crypto traders are notoriously bullish and it is not unusual for them to expect another all-time high of $4,870, but this seems like an unrealistic outcome.
Despite the current downtrend, there are still reasons to be moderately bullish over the next few months and using a “long condor with call options” strategy could do the trick.
Options strategies allow the investor to set upside limits
Options markets provide more flexibility to develop custom strategies and there are two instruments available. The call option gives the buyer protection against rising prices, and the protective put option does the opposite. Derivatives can also be sold by traders to create unlimited negative exposure, similar to a futures contract.
The ether options strategy is back. Source: Debit Position Generator
This long condor strategy is set for the expiry of March 25 and uses a slightly bullish range. The same structure can also be applied for bearish expectations, but this scenario assumes that most traders are looking higher.
Ether was trading at $2,677 when the price was set, but a similar result can be achieved starting at any price level.
The first trade requires the purchase of $3,000 worth of $5.14 ETH call options to create positive exposure above this price level. Then, to cap profits above $3,500, the trader must sell 4.4 ETH contracts of the $3,500 call.
To complete the strategy, the trader must sell 6.65 ETH contracts of the $4,000 call, capping profits above that price level. Lastly, a $4,500 upside protection call for 5.91 ETH is needed to limit losses if Ether unexpectedly spikes.
The strategy targets a healthy profit to loss ratio of 3.2 to 1.
The strategy may seem complicated to execute, but the required margin is only 0.175 ETH, which is also the maximum loss. The potential net gain occurs if Ether is trading between $3,100 (up 15%) and $4,370 (up 63%).
Traders should remember that it is also possible to close the position before the March 25 expiration. In this strategy, the maximum profit occurs between $3,500 and $4,000 at 0.56 Ether, which is more than three times the potential loss.
Unlike futures trading, this strategy gives the holder peace of mind because there is no liquidation risk. It is also worth noting that most derivatives exchanges accept contract orders as low as 0.10 ETH, meaning a trader could build the same strategy using a smaller amount.
The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.
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