Financial Engineering on BitcoinOkay, 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
You buy $7,316.5 USD worth of BULLUSD tokens, ftx.com ,which currently trades at about $3,199 USD. Those BULLUSD tokens will pay you 3X the daily return you will get in BTCUSD, and they will compound it daily, so you may end up making more than a 3X return. Here is a video that explains it: www.youtube.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.
