Earlier this year, a fleet of new exchange traded funds tracking the price of bitcoin cropped up, and just this week, exchange-traded options on these ETFs began to trade. Bitcoin, meanwhile, has continued to hit new all-time highs, today hitting $98,351.75 for a 36% gain in the month of November. A crypto-friendly incoming Trump administration is behind the recent momentum.
Because we usually do our trades only on dividend-paying stocks and appreciate risk redution, we will do a buy write with protective puts on the most liquid of the bitcoin ETFs, iShares Bitcoin Trust ETF (IBIT).
Please email me (dobosz@gmail.com) at any time with questions. — J.D.
iShares Bitcoin Trust ETF (IBIT) – Buy Write w/ Protective Puts
Buy 100 IBIT
Sell to Open 1 December 13 (weekly) $56 Call
Buy to Open 1 December 13 (weekly) $52 Put
Execute for Net Debit of $53.95 or lower
The price of bitcoin two years ago in the wake of the collapse of FTX, and the arrest of Sam Bankman Fried, was about $16,000. Today that price is higher by six-fold. Many people in third-world countries regard bitcoin assets as preferable to holding assets in local currencies. In addition, the United States may establish a strategic bitcoin reserve under a new Trump administration. This would further legitimitze bitcoin as a liquid asset and stimulate new demand for the cryptocurrency.
The IBIT ETF seeks to reflect performance of the price of bitcoin. The shares are intended to constitute a simple means of making an investment similar to an investment in bitcoin rather than by acquiring, holding and trading bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange.
Here is the recommended buy write: Buy 100 IBIT, sell to open one contract of $56 December 13 (weekly) calls and buy to open one contract of $52 December 13 (weekly) puts. If your broker allows you to put all of your trades together on one order, use a net debit of $53.95 or lower. If you cannot do all three trades on one ticket, do the buy write portion, and then purchase the puts with another order.
If IBIT closes above $56.00 on December 13, we would earn $2.05 per shrare on $53.95 at risk, or 3.8%. Over a 22-day holding period, the annualized return would be 63%. I will provide updates on this trade, including the potential sale of the puts and rolling the short options portion of the trade. A lower price on IBIT will correspond with higher prices for the puts.
Options income for this trade: We earn a net $175 selling 1 IBIT December 13 $56 call contract, and buying 1 IBIT December 13 $52 put contract.
This trade is from Forbes Premium Income Report. Click here to connect with John Dobosz on LinkedIn.
NOTE: Forbes Premium Income Report is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any assets or securities mentioned or recommended. We do not guarantee that investments mentioned in this newsletter will produce profits or that they will equal past performance. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. John Dobosz and members of the staff of Forbes Premium Income Report may hold positions in some or all the assets/securities listed. Copyright 2024 by Forbes Media LLC.
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