Quantitative trading firm TDX Strategies offers its clients a bullish Bitcoin trade with an interesting financing twist that helps offset the cost of the bet while reshaping the risk profile of the position.
The Hong Kong-based company on Wednesday suggested a “bullish risk reversal” strategy, which involves selling a put option (insurance against a downtrend) and using the premium earned to buy bullish call options – essentially funding bullish bets with proceeds from the sale.
This way, the trader pays virtually nothing up front while remaining exposed to a Bitcoin rally.
This reflects a broader shift toward more sophisticated, options-focused positioning as traders seek to further stretch their capital and refine their risk instead of just placing spot bets or simple leveraged bullish bets.
A call option is a contract that allows the buyer to bet that the price of an asset will exceed a specific level, called the strike price, on a certain date. If the price exceeds this strike price, the buyer can benefit; if not, they usually lose the small fee they paid for the option. It’s analogous to buying a lottery ticket.
A put option does the opposite. It allows the buyer to put in place protection against a possible decline of the asset below a specific strike price on a certain date. If this is the case, the buyer of the put option has everything to gain; if this is not the case, the entity risks losing the initial premium paid. It’s like buying insurance.
The play suggested by TDX combines the two in such a way that the trader becomes the seller of out-of-the-money (OTM) put options (insurance) and collects the premium on one leg, then redeploys it to buy an OTM call on the other leg.
The result is a low-cost bullish structure compared to simply buying a call. An out-of-the-money (OTM) call is an option whose strike price is higher than the current market price of Bitcoin, while an OTM put is an option whose strike price is lower than the current market price.
“The expected confirmation of Mojtaba Khamenei as supreme leader introduces an additional element of risk of immediate escalation of retaliation. However, we view any market jitters caused by the headlines as a tactical entry point,” TDX said in a market note.
“We are looking to capitalize on temporary weakness to create upside exposure in March and April. [expiry]favoring bullish risk reversals (funding OTM calls by selling OTM puts),” TDX added.
The strategy is not without risk. By selling out-of-the-money puts, the trader is obligated to buy Bitcoin at the strike price if the market falls below that level, meaning they end up acquiring the asset at a price higher than its prevailing market value.
At the same time, even though call options offer upside participation, their high strike prices mean they could expire worthless if the rally doesn’t live up to expectations. In effect, the trader trades a lower initial cost for a more asymmetric gain: limited upside above the call strike price and significant downside exposure below the put strike price.
The position therefore requires close monitoring and may not be suitable for new investors or those with limited capital and little understanding of options dynamics.
