Okay, here is a strategy to make more money using leverage, while at the same time risking less money, because your hedging your position with options. In other words, make more risking less.
But let’s put things into perspective. Option A: You buy Bitcoin at current price, $9,400 USD. If it raises to $20,000, as many expect, you make $10,600 USD or 112.77%. And if it drops to $6,500 USD, as some expect, you’ll lose $2,900 USD or 30.85%.
Here is option B:
And for that you will need an account in FTX: ftx.com/
And you also buy, as a hedge, right there on FTX, 2 BTC Put Options, with strike price of $9,400, and Expiration date of June 30, 2020, which should cover 2 BTC, at a cost of $1,041.75 x 2 = $2,083.5 USD.
In total, you would have invested the same amount as in option A.
Now let’s assume some scenarios, let’s say Bitcoin drops to $6,500 as some expect, in the first option you will lose 30.85%.
In the second option, those BTC Put Options would be worth $5,800 USD (($9,400-$6,500)x2), the BULLUSD tokens would probably had lost 60% of their value, but the other 40% would be worth $2,929.6 USD + $5,800 USD = $8,726.6 USD. Your loss would only be $673.4 USD or 7.16%, instead of 30.85%.
Now, let’s assume another scenario, let’s say Bitcoin jumps to $20,000 as some expect. In option A you would have made $10,600 USD or 112.77%.
In option B, your options would have expired worthless, but the 3x leverage tokes would have given you about a 400% return. 3X 112.77% plus a little more because of the daily capitalization.
So, the $7,316.5 investment in BULLUSD, would have grow to $36,582.5 USD, giving you a $27,182.5 return, minus the $9,400 USD, or 289% return. About 2.56 times more with less risk.
The worst-case scenario would be if the price stays flat, because you will lose the option premium and the BULLUSD tokens could deteriorate a little bite. So, you will probably end up loosing $2,400 USD in the worst-case scenario, about 25.5%.
Seeming that Bitcoin is close to break a triangle pattern, as shown on the chart, chances are it will move out of it way before June 30, 2020.
I hope you find this interesting and good luck to you.
What about a Bear token investment. And how does the token work. Does it reset daily like leveraged stock elf's are hold on to it. And why not buy a Bull/Bear Token, or a call/put option?
@chartingman43, Now, since I'm a little bite bias to the Bull side, I'm buying Bull Tokens, and I'm covering them, or headging with put options.
Raul_Dominguez
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@chartingman43, If I were to expect a big drop, I would buy Bear Tokens and hedge with call options. The exact oposite.
Raul_Dominguez
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@chartingman43, I could also do it with Move Contacts, but I would need to post another full Educational Post to explain them. Maybe later.
Raul_Dominguez
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@chartingman43, I hope I answer your questions and good luck to you.
chartingman43
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@Crypto_Masters, sounds good. Whats the benefit of a bull/bear token compared to regular margin shorts/longs. The leveraged reset of ETF seem to benefit primarily day traders and not swing traders who want to hold a position for a week or two. Do the bull/bear tokens reset on a daily basis or hold a leveraged amount continuously?
Raul_Dominguez
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@chartingman43, A big advantage is that if the price goes hard against you, you will not get liquidated, you can hold them forever if you want.
Raul_Dominguez
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@chartingman43, Another is that as the price goes against you, it will reduce exposure on a daily basis, meaning you would lose less, compare to a regular 3x futures position. And as it goes in your favor, it would reinvest the profits daily and make you win even more. All manage by FTX. It explains it in the video: youtube.com/watch?v=i3oWh_2BF1Y&;list=PL3sFPoaANv2SbbNPFGs3g9lQaxvRtIif7&;index=9&;t=2s
Raul_Dominguez
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@chartingman43, I been holding XRPBULL, a 3X Bull token on XRP, over the last 2 months, I’m up about 33%. And If XRP makes a big move to, lest say, 3.56 USD, the all-time high, I would make a lot more holding XRPBULL than I would make holding a long 3X futures position, because the Bull Tokens will compound the profits.