Trade Bitcoin Options Strategically in Q2: Make the Most of July’s Earnings

The stock market can provide valuable information regarding potential fluctuations in the price of Bitcoin (BTC) that could be set off this month.

Q2 earnings numbers due this month

It is noteworthy that some of the largest companies in the world are anticipated to release their Q2 earnings numbers in July.

The aggregate market capitalization of the S&P 500 companies is $36.5 trillion, so it is reasonable to anticipate a positive influence on Bitcoin’s price if the earnings season sees a moderate increase.

In other words, if the likelihood of an impending recession is diminished, investors will become more inclined to invest in risky assets.

Leverage to be avoided given the level of uncertainty

Traders who are predicting a worldwide economic downturn will have the opportunity to benefit if those businesses are not able to produce increases in earnings, thereby increasing the doubt in the economies. Governments rely greatly on taxes from businesses and individuals, so a feeble earnings period is a major concern.

Preparing financially for a recession.

Investors are worried that companies’ profitability could suffer due to the unprecedentedly strict monetary policy implemented by the United States Federal Reserve, as well as macroeconomic worries. Furthermore, due to the ongoing inflation, businesses are having to resort to job cuts and cost-saving measures.

Despite the economic downturn, the US economy has proven to be resilient, as demonstrated by the 0.3% increase in retail sales from April to May, which was contrary to what economists had predicted. This retail performance indicates that the drop in oil prices has enabled consumers to spend more on other items.

The use of the bullish “iron condor” strategy by professional traders, which allows for maximum gains with limited risk, can be attributed to the aforementioned scenario if Bitcoin trades above $31,550 in July.

Using Bitcoin options for a bullish but hedged strategy

Investing in Bitcoin futures can be lucrative during periods of growth, but there is a risk of liquidations when the value of BTC decreases. This is why experienced traders use options strategies to maximize profits and minimize losses.

Crypto derivatives 101: A comprehensive overview of crypto futures, crypto options, and perpetual contracts for beginners.

The iron condor strategy, with its skewed approach, can generate profits of over $31,550 by July’s end while simultaneously restricting losses in the event that the expiration price is lower than $31,000.

At the time when the pricing for this model was determined, it is noteworthy that Bitcoin was trading at $30,520.

The holder of a call option has the privilege of being able to purchase an asset at a predetermined price in the future. In exchange for this privilege, the buyer pays an initial fee referred to as a premium.

Meanwhile, the holder of a put option has the ability to sell an asset at a predetermined price in the future, providing them with a protective measure against losses. Conversely, selling a put gives the seller the potential to benefit from an increase in the asset’s value.

The iron condor is created by selling a call and a put option with the same expiration date and price. The example provided here is for the July 28 contracts, but it can be adjusted for other periods.

Major US banks receive satisfactory marks in stress test conducted under “severe recession” conditions.

Modest 3% Bitcoin price gain needed for profits

The goal profit range is from $31,550 (3% more than the present cost) to $38,000 (24.5% higher than the current price).

In order to initiate the trade, the investor must first short sell 1.5 contracts of the $33,000 call option and three contracts of the $33,000 put option. Subsequently, they must do the same for the $36,000 options, with the same expiry month.

It is also necessary to purchase 4.8 contracts of the $31,000 put option to guard against potential losses. Additionally, 3.7 contracts of the $38,000 call option must be acquired to restrict losses beyond that point.

This strategy yields its highest net profits of 0.206 BTC ($6,290 at current prices) between $33,000 and $36,000, yet still yields a net profit of more than 0.087 BTC ($2,655 at current prices) if Bitcoin is traded within the range of $32,150 to $37,150.

The maximum loss of 0.087 BTC (or $2,655) will occur if Bitcoin trades below $31,000 on July 28, and this is the amount of investment required to open a skewed iron condor strategy.

The advantage of this trade is that it reaches a broad audience while offering a potential 238% return in comparison to the potential loss. Essentially, it gives a leverage opportunity without the dangers of liquidation that are common with futures contracts.