Mastering the Basics: A Guide to Bullish Spreads in Crypto Trading
Starting Simple: The Basic Bullish Spread
Saketh stated the concept of a basic bullish spread, a fundamental strategy for those expecting a rise in market prices. He highlighted the importance of grasping simple adjustments and risk management techniques before advancing to more complex trading strategies.
Trade Execution and Planning
Using his own wallet as an example, Saketh demonstrated the process of creating a bullish spread for Bitcoin, focusing on options expiring on August 2nd. He carefully selected the $63,000 put option to short and the $62,500 put option to purchase, explaining his rationale based on market trends and liquidity considerations.
Risk Management and Capital Utilization
A significant portion of the session was dedicated to risk management. Saketh highlighted the importance of not risking more than 5-10% of one’s capital on a single trade. By using only 0.1 BTC, he illustrated how traders can limit their risk while still maintaining the potential for profit.
Calculating Risk and Reward
Saketh’s approach involves a meticulous calculation of risk and reward. With a potential profit of $17 against a risk of $32, he outlined a risk-to-reward ratio of approximately 1:2. Despite this seemingly unfavorable ratio, he stressed the importance of factoring in market trends and statistical probabilities, which, in this case, suggest a greater than 70% chance of the market ending above $63,000.
