Concerned about a Bitcoin Crash?
A Bitcoin option collar can provide downside protection at little to no cost. Here’s how you can implement this strategy, according to Cresset Capital CIO Jack Ablin.
What is a Bitcoin Option Collar?
A collar strategy involves holding a long position in Bitcoin while simultaneously buying a protective put option and selling a call option at a higher strike price. This setup caps your potential upside while providing a safety net against significant losses.
Why Use This Strategy?
- Cost-effective hedge: By using options, you can protect your investment without incurring significant costs.
- Market volatility: Given the unpredictable nature of the cryptocurrency market, this strategy can help safeguard your assets.
Steps to Implement the Strategy
- Purchase Bitcoin: Start by acquiring Bitcoin at your desired price.
- Buy a Put Option: This will give you the right to sell Bitcoin at a predetermined price, providing a safety net.
- Sell a Call Option: This allows you to earn premium income, offsetting the cost of the put option.
Conclusion
In a market that can shift rapidly, employing a Bitcoin option collar is an intelligent move to protect your investment with minimal cost. It's essential for traders and investors who want to stay ahead of market fluctuations.
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