Investors define the market as either bullish or bearish, but sometimes the price can stay within a specific range for an extended period of time.
This type of sideways movement is not necessarily stable as the cryptocurrency markets have high volatility that results from a series of uncertainties and early adoption cycles.
For example, investors who have concluded that bitcoin (B T cThe bull run was over after the first week of 2021, perhaps regretting that decision.
Starting January 8, bitcoin price traded in a descending channel within a range of $10,000. The movement lasted 26 days until it finally broke up in early February.
In August and September 2020, bitcoin had two different periods. However, it is not possible to treat those movements as a bull market. On the other hand, the bears had some reason to celebrate as the bottom of $10,000 was tested several times but the market recovered from it.
Is bitcoin price in an ascending channel?
While it is too early to call it, Bitcoin is likely to enter a positive range with a target of $40,000 by the end of June.
The current range indicates a range of $37,000 to $43,000 for June 25, but with the crypto’s extreme volatility, the support and resistance levels of the channel are sometimes tested excessively.
There is reason to believe that an imminent short-squeeze could quickly retest the $50,000 support for Bitcoin, given that $500 million raised by MicroStrategy and Paul Tudor Jones intends to increase his BTC position.
On the other hand, there is also a possibility that the comments of US Treasury Secretary Janet Yellen Digital assets being used for money laundering and illegal payments Bitcoin stands as a threat to the price. Furthermore, US Securities and Exchange Commission chairman Gary Gensler recently expressed concerns about the absence of regulation on crypto exchanges.
Smart traders take less risk on range trading moves
For options traders, sometimes the best option is to bet on maintaining the current range, especially for the short term. This is where the Christmas tree spread with put strategy comes into play.
Instead of betting on a bull or bear market, this options strategy uses protective put options to benefit traders with a neutral stance. The investor will profit if bitcoin remains between $37,170 and $44,000 on June 25. Therefore, it provides protection against 8.5% moves in both directions.
To achieve this, one needs to buy 2 BTC of a $36,000 put, buy 1.33 BTC out of a $46,000 put, and sell a $40,000 put worth 3.33 BTC. Each contract is maturing on June 25.
Christmas tree spread with puts is a low-risk strategy
With less than 11 days before the June 25 end, it is reasonable to assume that the market has a good chance of staying within this range. However, this strategy provided a maximum loss of 0.062 BTC ($2,515 at $40,570) in case of a surprise move.
Profit-wise, the strategy could yield 0.1375 BTC ($5,500) profit at $40,000.
Therefore, it seems like a smart choice for an investor who expects the current bullish momentum to continue. It is worth noting that most derivatives exchanges offer options trading as little as 0.10 BTC.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.