Seizing Opportunity with Bitcoin Options
Bitcoin Options: A generational opportunity within a dynamic asset class shaped by a power law distribution.
Options on Bitcoin: The US Premiere
As we await the impending trading approval for Bitcoin ETF options, we look forward to prospective opportunity and share some of our offshore experience as of late.
Strategies for Managing Tradeoffs and Maximizing Returns
A challenge for investors is mitigating volatility while maintaining exposure to the explosive potential of digital assets. Options provide a way to manage this trade-off effectively by design.
The Bitcoin options market has a unique structure, with an uncommon relationship between calls and puts. We leverage this characteristic to develop option strategies that generate yield while minimizing downside risk.
A European Bitcoin Options Strategy Example
The below is an example 6-month strategy, engineered via spot (BTC) augmented with an options strategy.
The strategy accomplishes a few of objectives:
Limits downside Bitcoin price risk. Even at a Bitcoin price of $500, the net return through December 2024 is a max -5.5% drawdown (-11% annualized).
Generates current cash yield of 8.6% (17.2% annualized). In this example a Bitcoin deposit of $1m generated a net premium of $86k.
Provides tiers of gains: Strategy nets +17% (34% annualized) with a BTC price between $73k and $200k at expiration.
Leveraged upside: At a Bitcoin price of $200k and above, the strategy exhibits 100% gearing, or gains $2 for every $1 Bitcoin price gain.
This is a 6-month example, and every aspect of the strategy including; duration, max drawdown, potential upside can be adjusted as deemed necessary.
With the upcoming introduction of Bitcoin and Ethereum ETF options, we are thrilled to soon offer investment services focused on crypto options trading to our U.S.-based investors, alongside our offshore clients who are already active in this space. We believe these new services present unique opportunities for both risk management and significant speculative gains. Stay tuned for further updates as we roll out these exciting offerings.