Profiting from Bitcoin’s Volatility with Naked Calls
Bitcoin’s price action is always an exciting story, and now that it’s back above $100,000 with political events like Trump’s inauguration looming, the question arises: Will it rally further or face a “sell the fact” scenario? Let me guide you through how to approach this situation with a strategy I often employ: naked call selling out of the money.
Understanding the Strategy
Selling naked calls involves selling call options without owning the underlying asset. This strategy is high-risk but can be profitable in a volatile market like Bitcoin. I target out-of-the-money (OTM) strikes near key resistance levels. According to my analysis, Bitcoin currently trades between $102,000 and $109,000, with significant resistance around $109,000. By selling calls slightly above this range, I position myself to collect premiums while minimizing the likelihood of assignment.
Timing the Trades
Bitcoin is known for intraday price fluctuations, offering opportunities to capitalize on volatility. My goal is simple: earn a few dollars within the day for a meal while managing risk. With today’s trades, I:
1. Sold 3 naked calls for the IBIT February 2025 $71 strike at premiums of $1.50, $1.52, and $1.53.
2. Focused on small, quick profits by closing the positions before major price moves.
Bitcoin’s movement often spikes around news events. For example, Trump’s policies could trigger a rally if they favor crypto, but uncertainty might also lead to “sell the fact” behavior. I watch charts closely, especially near resistance, to gauge momentum.
Risk Management
Selling naked calls requires a disciplined approach. Here’s how I manage risks:
• Set a strict stop-loss if Bitcoin nears my strike price.
• Avoid excessive leverage, keeping margin usage below 50%.
• Monitor market sentiment tied to major events like policy announcements.
By using technical analysis and maintaining a balanced portfolio, I can reduce exposure while benefiting from Bitcoin’s volatility.
The Bottom Line
Whether Bitcoin rallies or stalls, opportunities abound for traders like us. Selling OTM naked calls against resistance zones allows me to generate consistent income while leveraging Bitcoin’s natural volatility. It’s all about timing and discipline—small wins add up over time.$iShares Bitcoin Trust(IBIT)$
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