Here's how Bitcoin pro traders plan to capitalize on BTC's final rally above $20k

Here’s how Bitcoin pro traders plan to capitalize on BTC’s final rally above $20k

Bitcoin (BTCIt entered an ascending channel in mid-September and continued to trade sideways near $19,500. Given the bullish nature of technical formation and reduced selling pressure from struggling miners, analysts expect prices to rise over the next two months.

Bitcoin/US dollar price in FTX. Source: TradingView

Independent analyst @el_crypto_prof notes that BTC price has formed a “1-2-3 reversal pattern” on the daily time frame, hinting that $20,000 may turn to support soon.

Fundamental analysts also attribute the side action to the troubled Bitcoin miners listed. For example, Stronghold Digital Mining Debt restructuring announced On August 16, which included the return of 26,000 miners.

one year miner, Core Scientific sold 12,000 BTC Between May and July, publicly traded miners sold 200% of their Bitcoin production. StoneysGhoster, a bitcoin enthusiast, adds that excessive leverage caused the forced sale, not the mining activity itself.

Regardless of the underlying condition of the Bitcoin price recovery above $20,000, investors fear the impact of the eventual stock market crash as central banks continue to raise interest rates to curb inflation.

Given the ongoing uncertainty caused by macroeconomic factors, a strategy that yields gains in the $21,000 to $28,000 range while limiting losses below $19,000 seems wiser. In this sense, options markets provide more flexibility for developing custom strategies.

Begins with selling put options for bullish exposure

To maximize returns, investors could consider an Iron Condor options strategy that was slightly skewed to achieve a bullish result. Although a put option provides the buyer the privilege to sell an asset at a fixed price in the future – selling this instrument provides exposure to a price appreciation.

Bitcoin options payoffs skewed iron condor strategy. Source: Deribit Position Builder

The above example was set using BTC options November 25 at Deribit. To start the trade, the buyer must sell a short contract (sell) worth $23,000 and put options. Next, the buyer needs to repeat the procedure for the $25,000 options.

To protect against extreme price movements, a put option at $19,000 was used. Thus, 2.6 contracts will be necessary, depending on the price paid for the remaining contracts.

Finally, if the bitcoin price rises above $32,000, the buyer will need to acquire 1.6 long options contracts to limit the potential loss of the strategy.

The maximum profit is 2 times greater than the potential loss

Although the number of contracts in the above example aims to gain a maximum of 0.30 BTC ($5,700) and a potential loss of 0.135 BTC ($2,560), most derivatives exchanges accept orders as low as 0.10 lots. As a result, the strategy yields a net profit if bitcoin trades between $20,000 and $29,600 (+56%) on November 25.

The maximum net profit occurs between $23,000 and $25,000, resulting in a return twice as high as the potential loss. Furthermore, with 35 days until the expiration date, this strategy gives its holder peace of mind – unlike futures trading, which comes with inherent liquidation risk.