Ether (ETH) price has spent the past two months in a rut, and even the most bullish trader admits that the chance of trading above $4,400 over the next few months is slim.
Of course, cryptocurrency traders are notorious for bullishness, and it is not uncommon for them to expect another all-time high at $4,870, but this appears to be an unrealistic result.
Despite the current downtrend, there are still reasons for a moderate upside in the next few months, and the use of the “Long Condor with Call Options” strategy could be a positive result.
Options strategies allow the investor to set limits for growth
The options markets offer a great deal of flexibility to develop your own strategies and there are two tools available. A put option gives the buyer protection against a price increase, while a protective put option does the opposite. Traders can also sell derivatives to create unlimited downside risk, similar to futures contracts.
The ether option strategy provides a payout. Source: Deribit Position Builder
This long condor strategy is due to expire on March 25th and is using a slightly bullish range. The same structure can be used for a bearish forecast, but this scenario assumes that most traders are looking for an upside.
Ether was trading at $2,677 when the pricing occurred, but a similar result can be obtained at all price levels.
The first trade requires the purchase of $5.14 worth of $3,000 call options to create a positive exposure above this price level. Then, to cap the gains above $3,500, the trader must sell 4.4 contracts of ETH from a $3,500 call.
To complete the strategy, the trader must sell 6.65 ETH of $4,000 call contracts, limiting profits above this price level. Finally, a defensive call of $4,500 for 5.91 ETH is needed to limit losses in the event of an unexpected Ether rally.
The strategy aims for a healthy win ratio of 3.2 to 1.
The strategy may seem difficult to implement, but the required margin is only 0.175 ETH, which is also the maximum loss. The potential net profit arises if Ethereum trades between $3,100 (15% increase) and $4,370 (63% increase).
Traders should keep in mind that it is also possible to close a position before the expiry date of March 25th. 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 ensures the safety of the holder as there is no risk of liquidation. It is also worth noting that most derivatives exchanges accept orders as small as 0.10 ETH contracts, which means that a trader can build the same strategy using a smaller amount.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risk. When making a decision, you should do your research.