On October 1, the cryptocurrency market saw a 9.5% jump, which brought Bitcoin (BTC) and Ether (ETH) to 12-day highs. A number of reasons are attributed to the price movement, including the US CPI, the low supply in the stock market and the formation of a bullish continuation chart.
Traders are unlikely to find an explanation for the sudden move, other than that investors are regaining confidence after the September 19 fall was linked to pollution fears by Chinese developer Evergrande.
The Ethereum network has been criticized for its transaction costs of $20 or more due to the sale of non-financial tokens (NFTs) and decentralized finance (DeFi). Cross-bridges connecting Ethereum to PoS networks have partially addressed this issue, and the launch of Oracle’s end-to-end network service on Friday shows just how fast interoperability is evolving.
It is also worth noting that even the stricter rules announced by China last week had a positive impact on the volume of decentralized exchanges (DEX). Central crypto exchanges, including Huobi and Binance, announced the suspension of services for residents of China, and a massive influx of coins followed. At the same time, this movement intensified in the exchange of decentralized derivatives Uniswap and dYdX.
Even with all of this volatility, there are still reasons why investors might be on the air at the start of the year. At the same time, restrictions imposed by Ethereum’s first-tier metric have also forced some competitors to show significant gains over the past two months.
ETH price compared to AVAX, SOL, ATOM. Source: TradingView
Note that the 58% positive Ether performance over three months is significantly lower than the new ProS-of-Stake solutions that provide smart contract capabilities and interoperability.
For bullish traders who believe that the price of Ether will collapse but are not ready to face the liquidation risk that comes from futures, the Long Condor Call strategy may provide better results.
Let’s take a closer look at the strategy.
The alternatives are a safer attempt to avoid filtering
Options markets offer a great deal of flexibility for tailored strategies, and there are two tools available. A call option gives the buyer protection against a price increase, while a put option does the opposite. Traders can also sell derivatives to create unlimited downside risk, similar to futures contracts.
Ether options are back. Source: Deribit Position Builder
This long condor strategy was set in the late 31st of December and is using a slightly bullish area. The same basic structure can also be used for other periods or price ranges, although contract quantities may need some adjustment.
At the time of pricing, Ether was trading for $3,300, but the same result could be obtained at any price level.
The first trade requires buying a 0.50 contract of $3,200 of call options to create positive risk above this price level. To limit profits above $3,840, the trader must sell 0.42 ETH call options. To limit profits above $5,000, additional options contracts should be sold at 0.70.
To implement this strategy, a trader needs to protect more than $5,500 by buying 0.64 contracts on a call option if the price of Ether goes up.
The risk/reward ratio of 1.65:1 is moderately bullish.
The strategy may seem daunting, but the margin required is only 0.0314 ETH, which is also the maximum loss. The potential net profit arises if Ether is traded from $3,420 (up 3.6%) to $5,390 (up 63.3%).
Traders should remember that it is also possible to close the position before the expiry date of December 31st if there is sufficient liquidity. The maximum net profit is $3,840 to $5,000 at 0.0513 ETH, which is 65% higher than the potential loss.
With more than 90 days left until expiration, this strategy gives the owner peace of mind as there is no risk of liquidation like futures trading.