10x Research Recommends Bitcoin Investors Adopt a "Covered Strangle" Options Strategy

PANews reported on May 20 that according to Cointelegraph, research firm 10x Research stated on Monday that Bitcoin investors looking to generate additional income beyond holding in the spot market should consider setting up a "Covered Strangle" options strategy. The "Covered Strangle" strategy involves holding the underlying asset in the spot market while selling out-of-the-money (OTM) call options at a strike price above the current market rate of the underlying asset and selling out-of-the-money put options at a strike price below the spot market price of the underlying asset. The premium received from selling/shorting call options, which protects the counterparty from price increases, and the insurance from selling put options to hedge against downward trends, represent additional income.

10x Research recommends selling call options with a strike price of $100,000 expiring in December 2024, which is more than 50% above Bitcoin's current market price, and selling put options with a strike price of $50,000 expiring in December 2024, while holding the cryptocurrency in the spot market. Markus Thielen, founder of 10x Research, detailed this recommendation in a client report on Monday, stating: "Our favorite strategy is to buy Bitcoin in the spot market, sell call options with a strike price of $100,000, and sell put options with a strike price of $50,000, both expiring in December 2024. Selling call options could generate an 11% return, while selling put options could generate a 6% return. Therefore, this strategy provides us with a 17% downside buffer or 17% additional income, depending on Bitcoin's closing price in December, while we also capture all the upside (or downside) potential of Bitcoin."

This strategy is more popular when the market outlook is bullish but the upward trend is expected to unfold slowly, keeping implied volatility or investors' expectations of price fluctuations low. In this scenario, as the expiration date approaches, the value of options, especially out-of-the-money call and put options, will decay faster, bringing profits to the sellers. Although this strategy is attractive, it is not without risks and requires a high risk tolerance. This is because the risk leverage is lower than the level of selling put options, in this case, $50,000. In other words, 10x Research's strategy is designed for those who believe the Bitcoin bull market will progress slowly and corrections will not see prices fall below $50,000.