CRYPTO

Risky Ethereum Traders Use This Alternative Strategy to Increase ETH Exposure


On October 1, the cryptocurrency market felt a 9.5% pump that took Bitcoin (BTC) and Ether (ETH) to their highest levels in 12 days. Various factors have been blamed for the change in prices, including the US consumer price index, declining supply of the exchange and the formation of a “cup and handle” bullish continuation chart.

Traders will find no explanation for the sudden move, in addition to regaining investor confidence after the fall of September 19, China-based property developer Evergrand was blamed for the risk of infection.

The Ethereum network has received some criticism for its খরচ 20 or higher transaction costs due to ineffective token (NFT) sales and decentralized financing (DeFi) activity. Cross-chain bridges connected to Ethereum’s Proof-of-Stack (PoS) network are partially resolving this problem, and Friday’s umbrella network Oracle service launch shows just how fast inter-interoperability is advancing.

It is also noteworthy that even stricter rules announced by China last week had a positive effect on the volume seen on the Decentralized Exchange (DEX). Centralized crypto exchanges, including Hubei and Binance, announced a suspension of services for Chinese residents, followed by significant outflows of currency. At the same time, this increases the movement on Uniswap and decentralized derivatives exchange dYdX.

Despite all this volatility, investors in Ether still have reason to dwell towards the end of the year. At the same time, the limitations imposed by Ethereum Layer-1 scaling have also presented significant gains to some of its competitors over the past few months.

ETH Price vs. AVAX, SOL, ATOM. Source: Tradingview

Notice how Ether’s 58% positive performance in three months is significantly lower than emerging Proof-of-Stack (POS) solutions providing smart contract capability and inter-operability.

For bullish traders who think that ether prices will go sideways but are unwilling to face the liquidation risk imposed by futures contracts, the “long condor with call option” strategy may yield more favorable results.

Let’s take a closer look at the strategy.

Options are a safe bet to avoid liquidation

Alternative markets provide more flexibility for developing custom strategies and two materials are available. The call option gives the buyer side upward price protection and reverses the protective put option. Traders can sell derivatives to create unlimited negative exposure, similar to a futures contract.

The ether option strategy comes back. Source: Deribit Position Builder

This long condor strategy is set to expire on December 31st and it uses a somewhat brighter range. The same basic structure can be applied to other periods or price ranges, although some adjustment of the contract amount may be required.

Ether was trading at 3, 3,300 at the time of pricing, but similar results can be achieved starting at any price level.

To create positive exposure above this price level you need to buy a 0.50 contract of the বিকল্প 3,200 call option for the first trade. Then, to limit profits above $ 3,840, the trader must sell the 0.42 ETH call alternative contract. To further limit profits above $ 5,000, a further 0.70 call alternative contract should be sold.

To complete the strategy, a trader buying a 0.64 call alternative contract if the price of ether skyrockets requires reverse protection above 5 5,500.

The risk-reward ratio of 1.65 to 1 is moderately bullish

The strategy may seem complicated to implement, but the required margin is only 0.0314 ETH, which is also the maximum loss. Potential net profit occurs if Ether trades between $ 3,420 (up 3.6%) and $ 5,390 (63.3%).

Traders should keep in mind that it is also possible to close the position before the December 31 expiration date if there is sufficient liquidity. The maximum net profit occurred at 5 0.0513 ETH between $ 3,840 and 5,000, which is 65% more than the potential loss.

For more than 90 days until the expiration date, this strategy gives the holder peace of mind because there is no liquidation risk like in futures trading.

The opinions and opinions expressed here are only their opinions Author And don’t necessarily reflect Cointelegraph’s opinion. Every investment and trading move involves risk. You should do your own research when making decisions.