Being bullish on Ether (ETH) has paid off recently because the token gained 60% in the last thirty days. The spectacular growth of decentralized finance (DeFi) applications likely fueled arrival from institutional investors, and the recent London hard fork implemented a fee burn mechanism that drastically reduced the daily net issuance.

Although Ether is non nonetheless a fully deflationary asset, the upgrade paved the style for Ethereum 2.0 (Eth2), and the network is expected to abandon traditional mining and enter the proof-of-pale consensus soon. Ether will and so be slightly deflationary equally long as fees remain in a higher place a sure threshold and attach to the level of network staking.

In calorie-free of the recent rally, at that place are yet daily calls for Ether to rally above $5,000, but surely, even the almost bullish investors know that a ninety% rally from the current $3,300 level seems unlikely before year-end.

Information technology would seem more than prudent to have a safety net if the cryptocurrency market place reacts negatively to the potential regulation coming from the United states of america Representative Don Beyer of Virginia.

Despite existence in its early stages, the "The Digital Asset Market place Structure and Investor Protection Act of 2022" proposal seeks to formalize regulatory requirements for all digital assets and digital asset securities under the Depository financial institution Secrecy Human activity, classifying both as "monetary instruments."

Reduce your losses by limiting the upside

Because the persistent regulatory risks that exist for crypto assets, finding a strategy that maximizes gains up to $5,000 by yr-end while also simultaneously limiting losses below $2,500 seems like a prudent and well-aligned decision that would set up investors for both scenarios.

There's no amend way to do this than using the "Iron Condor" options strategy that has been slightly skewed for a bullish effect.

Ether options Iron condor skewed strategy returns. Source: Deribit Position Builder

The call option gives the buyer the right to acquire an asset at a fixed cost in the futurity. For this privilege, the heir-apparent pays an upfront fee known as a premium. Selling a phone call selection, on the other hand, creates a negative exposure to the asset price.

The put option provides its heir-apparent the privilege to sell an asset at a fixed toll in the future — a downside protection strategy. Meanwhile, selling this musical instrument offers exposure to the price upside.

The Iron Condor basically sells both the call and put options at the same expiry toll and engagement. The to a higher place example has been set using the ETH December 31 options at Deribit.

The max profit is 2.5x larger than the potential loss

The buyer would initiate the trade by simultaneously shorting (selling) 0.50 contracts of the $3,520 call and put options. Then, the buyer needs to repeat the procedure for the $4,000 options. To protect from extreme price movements, a protective put at $two,560 has been used. Consequently, 1.47 contracts will be necessary depending on the price paid for the remaining contracts.

Lastly, just in case Ether'due south price rips to a higher place $7,000, the heir-apparent volition need to acquire 0.53 call option contracts to limit the strategy's potential loss.

Although the number of contracts on the higher up case aims for a maximum ETH 0.295 gain and a potential ETH 0.xi loss, most derivatives exchanges accept orders as low equally 0.10 contracts.

This strategy yields a net gain if Ether trades betwixt $two,774, which is 10.5% below the electric current $3,100 cost, and $5,830 on December 31.

Past using the skewed version of the Iron Condor, an investor tin turn a profit as long as the Ether toll increment is lower than 88% by twelvemonth-terminate.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading motion involves adventure. You lot should conduct your ain research when making a decision.