Well-known for its precise market forecasts, 10x Research advises Bitcoin (BTC) investors to try a "covered strangle" strategy to generate extra income while holding Bitcoin in the spot market. This method involves selling out-of-the-money (OTM) call and put options while retaining the underlying asset.

Understanding the Covered Strangle Strategy

The covered strangle strategy involves holding Bitcoin and selling an OTM call option with a strike price above the current market price, as well as an OTM put option with a strike price below the current market price. The premiums earned from selling these options provide extra income. For the latest financial and business news, visit COINTURK FINANCE.

Markus Thielen, founder of 10x Research, recommends selling a call option with a $100,000 strike price and a put option with a $50,000 strike price, both expiring in December 2024. Thielen suggests that the call option could yield an 11% return, while the put option could yield 6%, offering a combined potential return of 17%, in addition to any gains from holding Bitcoin.

This strategy works best when the market outlook is positive but the rise in Bitcoin's price is expected to be gradual. In such a scenario, implied volatility remains low, causing the value of OTM call and put options to decrease more quickly as expiration approaches, benefiting the sellers.

Weighing the Risks: Caution is Key

Despite its potential profitability, the covered strangle strategy carries significant risks and requires investors to have a high risk tolerance. The main risk is if Bitcoin's price drops below the $50,000 strike price of the put option. In such a case, both the spot position and the short put option would incur losses, potentially doubling the loss percentage compared to holding a covered strangle long position alone.

This strategy is suitable for those who believe Bitcoin’s bull market will advance slowly and that any market corrections won’t push prices below $50,000. Currently, Bitcoin is trading around $67,000, which represents a 58% gain since the start of the year. Analysts, including Thielen and former BitMEX CEO Arthur Hayes, anticipate a slow and steady increase in Bitcoin's price.

In conclusion, while the covered strangle strategy proposed by 10x Research can offer attractive returns, it is crucial for investors to carefully consider the associated risks. This strategy is best for those confident in a gradual, upward trend in Bitcoin's market value and who can handle the potential downsides.