Quant-driven trading firm TDX Strategies is pitching bullish Bitcoin trades to clients with interesting financing options that help offset the cost of the bet while reshaping the risk profile of the position.
The Hong Kong-based firm on Wednesday proposed a “call risk reversal” strategy that involves selling puts (insurance against a downward trend) and using the earned premium to buy bullish call options – essentially funding a bullish bet with the proceeds from the put options.
This way, traders effectively pay little or no fees while still being exposed to the risk of Bitcoin rising.
It reflects a broader shift toward more complex, options-driven positions, as traders look to further expand capital and adjust risk rather than just committing to spot or outright bullish leveraged bets.
A call option is a contract that allows the buyer to bet that the price of an asset will rise above a specific level (called the strike price) on a specific date. If the price climbs above that strike price, the buyer profits; if it doesn’t, they typically only lose a small amount of what they paid for the option. This is similar to buying a lottery ticket.
The opposite is true for puts. It allows the buyer to set up protections against the possibility that an asset will fall below a specific strike price by a specific date. If so, the put buyer makes a profit; if not, the entity loses the initial premium paid. This is similar to buying insurance.
TDX’s suggested play combines the two, allowing the trader to become the seller of an out-of-the-money (OTM) put (insurance) and collect the premium on one leg, which is then redeployed to purchase the OTM call on the other leg.
The result is a low-cost call structure compared to purchasing call options outright. An out-of-the-money (OTM) call option is an option with a strike price higher than the current market price of Bitcoin, while an OTM put option is an option with a strike price lower than the current market price.
“The expected confirmation of Mojtaba Khamenei as supreme leader carries the additional risk of an immediate escalation of retaliation, but we view any headline-driven market jitters as a tactical entry point,” TDX said in a market note.
“We hope to take advantage of the temporary weakness and build upside exposure in March and April [expiry]favoring a bullish risk reversal (by selling out-of-the-money puts to fund out-of-the-money calls),” TDX added.
This strategy is not without risks. By selling an out-of-the-money put option, the trader is obligated to buy Bitcoin at the strike price if the market falls below that level, meaning he will end up buying the asset at a higher price than the current market value.
At the same time, while call options offer the opportunity to participate on the upside, their high strike prices mean the calls may be worthless if the rally is weaker than expected. In effect, traders trade lower upfront costs for more asymmetric returns: limited upside above calls and greater downside risk below puts.
Therefore, this position requires close monitoring and may not be suitable for new investors or investors with limited capital and a poor grasp of options dynamics.
