Bienvenidos mis ositos, tu siempre eres mis queridos! (Welcome back little bears you are always my dears!)
Normally I don’t recommend leverage of any form to anyone ESPECIALLY with crypto.
Not to be too condescending but let’s face it most people in the crypto space have mental deficiencies…
My subscribers are the rare exceptions of course. Not only are they highly intelligent, they are quite generous! They always tip ol’ Panda for his writing effort.
Most people should stay away from leverage especially in crypto. However Bitcoin maybe an exception.
The ol’ gal has seen better days. She only has few good pumps left…
Troll’s Granny: Are you talking about me?!?
Panda: Not everything is about you!
Troll’s Granny: Well you’re behind on your rent! So it’s only fair that you pay your rent with your behind.
Panda: Aagh!!!
Bitcoin gains can come out fast and seemingly out of nowhere.
Now, while the gains should be pretty good in this cycle they won’t be as good like the past.
The space has matured and a lot of folks that got burned in the past probably won’t come back.
That means we need to find ways to juice our Bitcoin returns.
Some folks have resorted to leveraging their Bitcoin positions to get to comparable returns from prior cycles.
While we wait for the SEC to approve a Bitcoin ETF…
We have to make do with what we have.
Borrowing from TradFi lenders will set you back at least 5% plus an additional spread on top of it. And that is IF you get approved.
I don’t like borrowing money especially at these rates.
Options are a “softer” form of leverage (assuming you don’t overdo it).
Microstrategy $MSTR is the current Bitcoin poster child.
Always remember that $MSTR is a good substitute for BTC trading but it is NOT real Bitcoin.
My rough back of the napkin math says that at the time of this writing 1 Bitcoin buys roughly 85 shares of $MSTR. Or the other way to look at is 1 share of $MSTR can buy .012 Bitcoin.
Since 1 option contract controls 100 shares of any given stock. 1 $MSTR call option controls 1.2 Bitcoin assuming it expires in the money.
We also have to assume that Microstrategy continues to stay in business and has no issues with fraud etc.
Most newbie option traders get rekt because they buy too many options or don’t buy enough time to see their thesis play out fully.
Keep your eyes on your breakeven amount (strike + premium paid)
There are three factors you have to keep an eye on when trading options:
Profitability vs liquidity vs probability
At the money (ATM) (50/50 shot but most liquid) 380 strike is $165 on the “Ask”
In The Money (ITM) (better chance of profit but most expensive) 330 strike is $180 on the “Ask”
Out Of The Money (OTM) (cheapest but have low chance of turning a profit) 500 strike is $136 on the “Ask”
Troll: Buuut Panda! All this option stuff looks expensive!
These options look “expensive” but are still a fraction of the stock price ($380.74 at the time of this writing). If you take the 500 strike you are paying $13,600 to control 100 shares of $MSTR at $500.
So that means you’re hoping $MSTR will cross $636 (500 strike + $136 call premium) by Dec 2025 in order to profit.
The options I’m showing are the furthest out LEAPS expiration cycle and will have the least time decay.
Don’t forget that you don’t have to buy right away, you can always wait for a pullback.
The beauty of options is that there are so many ways to construct the risk reward profile that you want.
Trading is already difficult. Trading options is the greatest challenge any trader can hope to overcome.
Of course there’s nothing wrong with dollar cost averaging into Bitcoin.
But IF you can use options properly you can get juicy returns.
Don’t forget to come BACK to this blog to see how these type of trades play out.
Obviously none of this is formal financial or tax advice. You need to find qualified professionals in your jurisdiction.
Be sharp, stay hungry let’s get that money!
