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Ethereum Price Prediction Q2 2023
Readers of the newsletter most probably have already noticed I trade not only stock options but also crypto options.
At the moment I have a small portfolio with Ethereum. Where I'm selling bot put and call options. After recently rolling up and forwarding a suffering position to June 30, 2023 expiry I decided to take a closer, more technical look at ETH and try to predict/forecast where is Ethereum headed to.
I'm sharing my findings:
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset
There was a golden cross back on February 10, 2023, meaning we are in a bullish market, and most probably will stay there until the end of June. A possible pullback down to $1,750 is possible, also $1,480 could be tested (but that seems highly unlikely)
it’s harder to find the upside resistance level, ETH has broken above its previous highs and the next stop is harder to set, but, might seem to be at $2,500, before trying to rally up to $3,000.
options delta, with June 28, 2023 expiry looks following $1,500 (-0.10 Delta) and $3,500 (0.08 Delta). Meaning there is about an 82% probability that ETH will trade in between $1,500 and $3,500 on June 30, 2023
How To trade such market
As I have already a position entered with June 28, 2023 expiry I can only watch and adjust.
Currently holding a $2,000 call option, which I'm hedging with weekly put options (drop me a comment to learn more). Most probably I will have to adjust the $2,000 call position several more times before the expiry.
If I would look for a new trade, I would look at selling covered call or straddle options with deltas under 0.1 at each of the sides.
On Apr 17, 2023, I could buy 1 ETH at $2,081 and I could sell June 30, 2023 call options with a strike of $3,500 (delta 0.08) for 0.01 ETH and also sell a put option with a strike price of $1,400 (delta -0.07) for 0.015 ETH. Selling put option at the moment is optimal.
That would net me 0.0215 ETH instantly on my 1 ETH investment or 2.15% potential income in 73 days if options expire worthless. Also this trade at the time of writing would give about an 85% probability to expire worthless.
What happens next?
On the expiry date, June 30, 2023, ETH is trading under $3,500 per coin - the call option expires worthlessly and I keep the premium and start over - if ETH trades above $3,500 on the expiry date, I pay the difference in crypto.
Say ETH trades $4,000 on expiry, I need to pay the difference between the spot price and strike price, which is $500 or converted it back to ETH which would equal 0.1428 ETH.
I would be left with 1+0.01+0.0115-0.1428= 0.8787 ETH
Converted back to USD = $3514.8
Despite I would lose some ETH coin itself, I would still gain massively from my initial investment.
What are your thoughts on Ethereum? Are we going to test $2,500 anytime soon or ETH is doomed to fall back?