Here’s how multi-leg options allow traders to profit from $2K Ethereum price
Using multi-leg options can give traders a less risky way to invest in Ethereum price as it pushes above $2,000.
This week Ether (ETH) price finally broke through the $2,000 level as aggressive institutional inflow through Grayscale Investments products and declining exchange reserves signaled that buying pressure was increasing.
While many traders are skilled at using perpetual futures and the basic margin investing tools available on most exchanges, they may be unaware of additional instruments that can be used to maximize their gains. One simple way, albeit expensive, is buying Ether call option contracts.
This week Ether (ETH) price finally broke through the $2,000 level as aggressive institutional inflow through Grayscale Investments products and declining exchange reserves signaled that buying pressure was increasing.
While many traders are skilled at using perpetual futures and the basic margin investing tools available on most exchanges, they may be unaware of additional instruments that can be used to maximize their gains. One simple way, albeit expensive, is buying Ether call option contracts.
The above trade consists of selling 1 Ether contract of the March 26 put option with a $2,240 strike while selling another 1 Ether contract of the $2,880 strike. The additional trades also avoid the unexpected scenarios for the same expiry date.
The trader needs to buy 0.73 Ether contracts of the $4,160 call in order to avoid excessive upside losses. Similarly, buying 1.26 Ether contracts of $1,440 puts will protect against more significant negative price moves.
As the estimate above shows, any outcome between $1,780 and $3,885 is positive. For example, a 20% price increase to $2,160 results in a $478 net gain. Meanwhile, this strategy's maximum loss is $425 if Ether trades at $1,440 or lower on March 26.
On the other hand, this strategy can net a positive $580 or higher gain from $2,240 to $3,100 at expiry. Overall it yields a much better risk-reward from leveraged futures trading, for example. Using 3x leverage would incur a $425 loss as soon as Ether drops 8%.
This multiple options strategy trade provides a better risk-reward for those seeking exposure to Ether’s price increase. Moreover, there is zero upfront funds involved for the strategy, except from the margin or collateral deposit requirements.
