In recent weeks, Bitcoin prices rose by 50%, giving rise to a new mania. So, what’s the best way to trade it? Because of Bitcoin’s extreme volatility, it does not provide a steady income. Its other drawback is that it does not provide a predictable stream of income. Fortunately, we can generate income by using options on Yuan Pay Group Website.
Crypto stocks like Coinbase are popular, so we could look at how we can generate income by using option income strategies. Alternatively, if you want a less volatile strategy, you can trade covered calls on the Amplify Transformational Data Sharing ETF. While this exchange-traded fund is very much volatile, it is still less volatile than Bitcoin and other crypto shares.
The pool of securities in BLOK consists of investments in companies specialized in blockchain production, including PayPal, MARA, Square and Nvidia. Here is how a covered call trade on BLOK works.
How to trade Bitcoin using the Covered Call option
An option to buy a 55-call contract that expires in September was trading Monday for around $1.55 per share, generating $155 in profit per share. Selling the call option generates an annualized income of around 30% in less than two months, equal to 3.13% in just under two months.
Selling the call option generates an annualized income of around 30% in under two months, equal to 3.13% in just under two months. Moreover, selling the call option has some upside potential as well. When the shares are called away at 55, the trader will have gained $555 on the shares bought at 51, in addition to the $155 premium option. It is equivalent to a 10.9% profit.
Any gains you make from selling this Bitcoin-linked ETF may be erased if the ETF drops. Investors should be aware that options are risky, and they can lose their entire investment.
Fixed-income profits are desperately sought by institutional investors since traditional finance typically offers yields below 5%. Although you can receive 4% a month with bitcoins because there are certain risks involved in using derivatives on trades with low risks.
According to Paul Carpelli talking to Cointelegraph, the deflationary schedule of issuing bitcoin and its stable supply curve makes bitcoin a demanding hedge against poor money policies and inflation which can cause to cash to devalue over time. Most centralized services like BlockFi, Nexo, and Crypto.com yield between 5% and 10%/year for depositing stablecoin. To raise payout, you must face huge risks, which need not mean a lesser-known intermediary.
However, Bitcoin derivatives can be used to attain a 2%/week. At present, the liquidity of those instruments resides on exchanges. So, when analyzing such trades, you can look into account counterparty risk.
Selling the covered call may be a partially fixed business
An option buyer can buy Bitcoin on a set date at a fixed time in the future. To obtain this right, you have to pay upfront. Usually, buyers of this instrument pay for it as insurance, while sellers see it as a semi-fixed instrument.
As each contract sets a strike price and expiry date, it is possible to estimate losses and gains ahead of time. By selling covered call, most above the current market price, a covered call strategy is used to hold bitcoin and increase its value.
In my opinion, it would not be fair to call the trade fixed income because the trade raises the Bitcoin balance, but does not protect against negative prices for those returnsdollars.
The strategy does not increase the risk of any Bitcoin holder since the position remains unchanged whether the price rises or falls.